U.K. retail sales unexpectedly rose by the most since records began in 1986. So the retail sales bought the U.K. economy some time in the short run as it fuels their economy on a bit further.
Probably that was the hottest May ever recorded. So that really spurred a lot of clothing sales.
This month was a lucky month, retail sales rose 3.5 percent. That was some serious buying within 30 days time.
But this may not be sustainable for U.K. economy, here are the reasons why.
Housing prices have been falling. They had slided 9 percent this year alone. That is the worst drop in 15 years.
Central Bank chief Mervyn King says it has further to go. And he gets his hands on more real-time data than you or I could ever think of.
So falling house prices and higher food and energy costs are going to dampen consumer spending even more in the coming months.
The British have taken on a record 1.4 trillion pounds ($2.8 trillion) in debt. And those borrowing costs arent getting any cheaper.
In fact, just when the economists were predicting rate cuts, the bank surprised the market this month by holding rates steady. This will make it harder for individuals and corporations for the remainder of the year.
In the Bank of England minutes mentioned that lower growth will be necessary to have inflation return to the 2 percent inflation target.
Then the same day, Chancellor Alistair Darling tag teams Governor King and adds in his own comments in a speech that reinforces this whole idea.
This means UK economy is headed for a slowdown and suggested that the impact of a worldwide squeeze on borrowing costs is continuing.
The pound could break higher in the short term, but in the long run, eroding fundamentals are going to drag down this slowing economy.
GBP/USD tends to fall whenever Stochastic shows overbought on the Daily chart. It will then be a good trading strategy to trade UNDER on GBP/USD using Mansion platform.
Binary option trading is a safer way to trade forex, traders will not lose more than the capital that they have traded. UNDER in binary option is similar to buying a put option.
Try out the demo account. Minimum trade amount is US1.
See here for the image of the trading platform and GBP/USD chart: http://binarytrading.blogspot.com/2008/07/pain-is-just-getting-started-for-pound.html
About the Author:Currently I'm working as a trader in a hedge fund.
Previously I was working as a commodity specialist in a bank, advising high net worth individuals and institutions on commodities trading.
Aspires to be a fund manager. In 2007, I had participated in a 1 year stock-pick competition organized by Zacks.com in America. At the end of the competition, I was ranked 407th out of 27,700 participants, hence this makes me top 1.47% of the competition. I had achieved 32.67% return on the competition portfolio, for the same period S&P was only up 6.99%, and Dow Jones was only up 4.16%, hence I had outperformed the broad market by a wide margin.
I often post my trading ideas here:
http://Basemetal-Trading.blogspot.com/
http://Investment-News-Update.blogspot.com/
http://AllAboutOil.blogspot.com/
http://BinaryTrading.blogspot.com/
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