Feeling gutsy enough to take on more forex volatility this week? You might wanna keep close tabs on the British pound, as the U.K. has these top-tier events lined up in the next few days.
1. U.K. CPI (Sept. 16, Tues 9:30 am GMT)
First up is the U.K. CPI release tomorrow, which is expected to show another decline in price levels. Recall that the headline figure already slipped from 1.9% to 1.6% in July and it is slated to print another drop to 1.5% for August, far below the Bank of England’s 2% annual inflation target.
Meanwhile, the core version of the report is expected to hold steady at 1.8%, after falling from the 2.0% figure logged in last June. However, another decline in core inflation might lead to more pound weakness, as this would suggest that the BOE probably shouldn’t start tightening monetary policy just yet.
2. U.K. Jobs Data (Sept. 17, Wed 9:30 am GMT)
Is the U.K. also about to suffer an employment slowdown like some of the major economies? Well, the past three jobs reports have indicated that the U.K. is doing mighty fine and the upcoming release should show whether this upbeat trend was sustained or not. For the month of August, the number of claimants is expected to drop by 29.7K, a slightly slower pace of unemployment reduction compared to July’s 33.6K decline.
With that, the jobless rate is projected to improve from 6.4% to 6.3% in August, which might revive rate hike expectations once more. Bear in mind though that the BOE has been zooming in on wage growth as an additional gauge of labor market progress and that another decline in salaries would indicate more economic slack and undermine hiring gains. Analysts are expecting to see a 0.5% rebound in average earnings, which might boost the pound this time.
3. BOE Meeting Minutes (Sept 17, Wed 9:30 am GMT)
The pound’s reaction to the U.K. jobs release might be short-lived though, as the BOE is also set to print the minutes of its latest monetary policy meeting at the same time. Recall that this caused quite a ruckus among pound pairs in the previous month, with the July MPC minutes revealing that a couple of policymakers voted to hike interest rates then.
Although the U.K. economy printed a few disappointing reports after the BOE’s July meeting, market watchers are still expecting to see at least two votes supporting a rate hike. Any additional rate hike votes could be even more bullish for the pound while a unanimous vote to keep rates on hold might push the U.K. currency lower, as this latter scenario might cast more doubts on Carney’s tightening forecasts for next year.
4. U.K. Retail Sales (Sept 18, Thurs 9:30 am GMT)
On Thursday, pound traders will get a glimpse of how the consumer sector is faring, as the U.K. will print its August retail sales report. Consumer spending is expected to pick up pace for the month, with a projected 0.4% increase in retail sales.
Retail sales in the U.K. has been in a rut since May when the economy saw a 0.5% decline in spending, followed by a couple of months of mere 0.1% upticks. This has mostly been blamed on seasonal factors and the fact that wages and price levels have been falling. A stronger than expected recovery in spending could lead to a pound rally while another bleak retail sales figure could keep gains in check.
5. Scottish Independence Vote (Sept 18, Thurs)
Among the big events lined up in the U.K. this week, the Scottish referendum is perhaps the most anticipated one. As I’ve discussed in my blog post on what Scottish independence might mean for the pound, the outcome could have long-term effects on political and economic stability.
Early survey results have been pushing the pound around in the past few days, as most of the polls have been hinting at a close fight between the pro-independence and anti-independence camp. The official results of the referendum will likely be published a few days later, but early vote counts and exit polls might offer hints on whether Scotland will stay in the U.K. or not.
There you have it, forex fellas! Quite a jam-packed week, eh? Where do you think GBP/USD will be at the end of this trading week?