Surprisingly positive data published last week on retail sales in the UK in July exceeded the expectations of economists. Retail sales in the UK in July, the first month after the Brexit referendum, were up by 1.4% and by 5.9% y-o-y (forecast: growth by 0.2% and 4.2%, respectively).
For three days GBP/USD pair increased by nearly three figures, reaching 1.3035. However, on Friday GBP/USD pair fell amid the closing of short dollar positions at the end of the trading week and the comments of a number of Fed officials about the high probability of an early interest rate increase in the US. GBP/USD pair opened the trading day with a decline and grew sharply in the early European session. However, further growth of the pair paused.
Today's trading day is characterized by nervousness of traders related to the upcoming economic forum in Jackson Hole in the US. Also on Friday at 11:30 (GMT + 3) UK GDP for the 2nd quarter (pre-release) will be published.
Britain ranks first on the annual percentage increase in GDP among all the strongest economies in the world. Positive macroeconomic data presented last week give us hope that the UK economy has not collapsed after the referendum.
Earlier, the Bank of England repeatedly stated that lack of GDP growth and labor market are the main factors affecting its decision on the rate and monetary policy in the UK as a whole.
The positive dynamics of the GDP (expected to increase by 0.6% and by 2.2% y-o-y) will also give more confidence not only to the Bank of England whose next meeting is scheduled for September 15, but also to the traders who believe that the pound is oversold on the foreign exchange market and the fears about the state of the UK economy because of Brexit are exaggerated.
Next week highest volatility is expected in GBP/USD pair due to the opposite influence of expectations of the speech by Fed's Janet Yellen at the economic forum and the positive UK GDP for the 2nd quarter. All of this will be known on Friday. The time of Janet Yellen'd speech on Friday will be announced separately.