Cheerio, pound traders! It’s gonna be another eventful week as three top-tier catalysts are on the U.K. economic docket in the next few days. Here’s what you need to watch out for:
U.K. Inflation Figures (Sept. 12, 9:30 am GMT)
It seems that policymakers can’t stop talking about inflation trends these days and for good reason. Maintaining price stability, after all, is the mandate of most central banks, including the Bank of England.
To put things in context, BOE head honcho Mark Carney and his fellow policymakers have been disappointed by the July inflation figures that the central bank dialed their hawkish bias down a notch. This means that the results of the upcoming inflation releases could set the tone for the BOE statement later in the week.
Analysts are expecting the headline CPI to accelerate from 2.6% to 2.8% and the core reading to tick higher from 2.4% to 2.5%. Producer input prices could show a 1.2% gain after previously printing a flat reading while output prices could be up 0.2%, signaling stronger price pressures to be feed into overall consumer inflation down the line.
Looking at the underlying data from the business PMI surveys conducted by Markit reveals that input costs picked up in the services industry while the manufacturing sector reported its first pickup in input price inflation in seven months. Businesses in the construction industry also noted that the weaker pound has driven prices of materials higher.
U.K. Jobs Data (Sept. 13, 9:30 am GMT)
Next up, we’ve got the jobs report, which is comprised of three key components: claimant count, unemployment rate, and average earnings index.Among the three, the average earnings index could garner the most attention since strong wage growth usually translates to upside inflationary pressures. For the three-month period ending in July, the index could advance from 2.1% to 2.3%, and overshooting these expectations could be bullish for the pound.
Meanwhile, the claimant count for August could show a 0.6K increase in the number of folks claiming unemployment-related benefits for the month, erasing part of the 4.2K reduction in joblessness seen last July. Still, the unemployment rate could hold steady at 4.2%.
Based on the latest batch of PMI readings from Markit, job creation has surged to its 19-month high in August for the services sector. The construction industry, on the other hand, reported its weakest pace of hiring since July last year while the manufacturing industry saw its thirteenth consecutive month in employment gains.
BOE Decision and MPC Minutes (Sept. 14, 12:00 pm GMT)
With the CPI and jobs figures already available by the middle of the week, traders should have a pretty good inkling of how the BOE statement might turn out.
In their earlier statement, the U.K. central bank kept rates unchanged at 0.25% as expected in a 6-2 vote, which reflected a bit less hawkishness compared to the 5-3 vote to hold back in June. At the same time, policymakers downgraded their 2017 growth forecast from 1.9% year-on-year to just 1.7% while projecting inflation to increase by 2.7% year-on-year compared to the earlier 2.6% forecast.
This time around, most MPC members are still expected to sit on their hands once more and probably express some caution about weak wages and consumer spending. To get a clearer picture of how the Brits have been faring lately, don’t forget to check out my latest U.K. Economic Snapshot!
In their August Inflation Report, BOE officials shared expectations for a “smooth Brexit” and it looks like U.K. officials are keen on maintaining this optimistic outlook. However, the latest round of Brexit negotiations seems to have gone by without much progress, so pound traders are eager to find out what the BOE makes of all this.