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Market Brief
Retail sales in the United Kingdom increased by 0.8% monthly in October, topping expectations and showing a positive reading for the first time in six months.
Compared to pre-pandemic levels, the figure was 5.8% higher. It was only non-food stores that grew their sales volumes, increasing by 4.2% in October 2021. This was driven by second-hand stores, toys, and sporting goods stores, as well as clothing stores (6.2%).
While online retail sales decreased in October 2021 to 27.3%, they remain significantly higher than the 19.7% recorded before the Coronavirus pandemic in February 2020.
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The GBPUSD is unable to push through the dynamic resistance, which is now resting at a confluent big figure level. Despite the relatively good news out of the UK today the pound is at the mercy of both the US dollar and the euro today. Price action and momentum are pointing to lower price levels and currently the stochastic indicator is not showing a bullish divergence to price. We could get at least one more leg down.
Despite decade-high inflation, fears of higher prices, and worries over rising interest rates, consumer sentiment in the UK rose this month, but the deepening cost-of-living squeeze has left household finances in a worse position this winter.
This month, consumers feel slightly less optimistic about their personal finances, but the outlook for the coming year is better. The weakness reflects day-to-day plans to save or spend, and it has a strong impact on the growth of the UK economy.
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The FTSE100 will welcome news that consumers are preparing to spend their cash, whether they do is still to be seen. With any luck the post-pandemic supply chain disruptions will loosen and if we can avoid a lock down this winter 2022 may not be as bad as some fear.
Compared with October 2020, the German index of producer prices for industrial products increased 18.4% in October 2021. According to data from the Federal Statistical Office, this was the highest increase over the corresponding month of the prior year since November 1951 (+20.6%). The overall index in October 2021 rose 3.8% over the previous month, September 2021.
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The EURUSD hasn’t reacted well to the data out of Germany and with ECB President Lagarde once again talking up higher inflation until the end of 2021 there is a chance that the Euro Area economy could be stagnating. President Lagarde went on to say that conditions to increase rates are very unlikely to be satisfied next year. Also worryingly is the news that Austria is preparing to go into full lockdown, so the fear is for this to spread westwardly.
The forex heatmap is looking more risk-on, so we should see a continuation higher in equities if this continues.
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Brent oil may have looked below the trading range and is now attempting to reclaim the mid-level of that range. Whether or not the news out of Austria today is enough for this new bullish action to reverse remains to be seen, but it is hard to get bullish without some new higher swing highs and higher swing lows.
