how does UK retail sales report affect gbp/usd pair?

@randolf_mercer - 4 months ago - Fundamental Analysis

I was looking at my economic calendar and i saw UK retail sales news was scheduled to be released soon. May I ask how exactly does Uk retail sales report affect the gbp/usd currency pair?

@andy_colgate_nottinghill - 4 months ago

If the UK retail sales data shows that there has been an increase in sales, then the UK government is obviously going to earn more in Value Added Tax (VAT).

When the UK earns more money from internally generated revenue such as VAT, it does not have to borrow or print more money & this reduces UK inflation.

A reduced inflation leads to a stronger British Pound, just as fewer borrowing means no need to buy foreign currency to settle external debt (this also makes the Pound strong)

In summary an increase in retail sales in the UK will make the GBP/USD exchange rate to rise so it will cost more USD to buy one GBP.