Morning Note: U.K. Retail Sales, U.S. Core PCE & Canada GDP Outlook

Investors Await U.K. Retail Sales Data

UK retail sales rose 1.7% MoM in January, driven by post-holiday discounting and seasonal factors, but are expected to decline 0.2% in February as consumer spending normalises. On a YoY basis, January saw a 1% increase, with February projected at 0.7%, reflecting ongoing cost-of-living pressures, high borrowing costs, and cautious consumer sentiment. Economic uncertainty and potential weather disruptions could also weigh on sales momentum. This data is set to be released on 28 March at 07:00 GMT.

(GBP/USD Daily Chart, Source: Trading View)

From a technical analysis perspective, the GBP/USD currency pair has been transitioning from a bearish to a bullish trend since mid-January 2025, as evidenced by the formation of higher highs and higher lows within an ascending channel. The pair is currently positioned between the swap zone of 1.2840 – 1.2880 and the resistance zone of 1.3040 – 1.3080.

If it breaks below the swap zone in the near term, it could drop further to retest the support zone of 1.2660 – 1.2600. Conversely, if it closes above the swap zone, it indicates that the bullish structure remains intact, potentially pushing the rate higher to retest the resistance zone of 1.3040 – 1.3080.

Will the U.S. Core Price Index Bring a Surprise?

The U.S. Core PCE Price Index YoY remained steady at 2.6% in January, with February’s forecast unchanged at 2.6%, indicating persistent but stable inflation. Meanwhile, the MoM figure slowed from 0.3% in January to a projected 0.2% in February, suggesting a slight easing in price pressures. This moderation may reflect softer consumer demand, stabilising input costs, or the ongoing impact of the Federal Reserve’s tight monetary policy in controlling inflation. This data is set to be released on 28 March at 12:30 GMT.

(S&P 500 Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the S&P 500 index has been in a bearish trend since mid-February, as indicated by the formation of lower highs and lower lows. Recently, it rebounded from the 5,510 level but was rejected from the swap zone of 5,780 – 5,810, dropping back to retest the 5,660 – 5,700 swap zone.

The key reaction from the swap zone of 5,660 – 5,700 could determine the index's next direction. If it manages to close above this swap zone, it could potentially surge upwards, continuing its bullish momentum from a weekly timeframe. Conversely, if this zone fails to hold, the index might continue dropping to form another lower low, potentially retesting the 5,400 – 5,440 support zone.

Will the Canadian GDP Rise as Expected?

Canada's GDP grew 0.2% MoM in December, with January’s growth expected to increase slightly to 0.3%, reflecting a modest economic rebound. This uptick is likely driven by improved business activity, a recovery in key sectors such as manufacturing and services, and resilient consumer spending despite high interest rates. This data is set to be released on 28 March at 12:30 GMT.

(GBP/CAD Daily Chart, Source: Trading View)

From a technical analysis perspective, the GBP/CAD currency pair has been in a bullish trend since mid-January 2025, as indicated by the formation of higher highs and higher lows. However, it recently underwent a bullish correction after a strong rejection by bearish forces in mid-March. It then found support and rebounded from the 1.8350 – 1.8380 support zone and is currently retesting the upper boundary of the descending channel. If the rate fails to break above this channel, bearish forces may regain control, pushing the rate downward.