If you’re trading the British pound this week, make sure you watch out for these three main events set to rock the forex charts! Here’s what each economic event is all about, what is expected, and how it might affect the pound:
1. U.K. CPI (Tues 9:30 am GMT)
First among the top-tier releases from the United Kingdom this week is the consumer price index, which gauges annual inflation or the yearly increase in price levels. This is a closely watched report since it helps the British central bank decide how to manage monetary policy, as strong inflationary pressures usually lead to tightening or rate hike expectations.
For the month of July, the U.K. is expected to show a slowdown in CPI, as the headline figure could dip from June’s 1.9% reading to 1.8%. Meanwhile, the core figure is projected to tick lower from 2.0% to 1.9%. Weaker than expected results could be bearish for the pound as these could further undermine the possibility of seeing a BOE interest rate hike this year.
2. BOE meeting minutes (Wed 9:30 am GMT)
Next up is the BOE meeting minutes which should shed more light on policymakers’ biases when it comes to adjusting interest rates. You see, BOE officials had been buzzing about a potential rate hike before the end of this year but later on backpedaled on their forecasts when economic data reflected a significant amount of slack.
In particular, members of the monetary policy committee are concerned that the lack of wage growth could soon take its toll on consumer spending. After all, people are less likely to spend if their salaries are lagging far behind rising price levels. Apart from that, policymakers appear to be less concerned about a housing price bubble, as home prices and mortgages have retreated recently.
If the minutes of BOE’s latest meeting confirm that Governor Mark Carney and his men are no longer considering hiking rates this year or early next year, the pound might be in for a steeper drop!
3. U.K. retail sales (Thurs 9:30 am GMT)
Last but not least is the retail sales release, which indicates whether consumer spending increased or decreased during the reporting period. This is also an important piece of data since consumer spending contributes a hefty chunk to overall economic growth.
For the month of July, retail sales is expected to pick up by 0.4%, a faster pace of increase compared to June’s 0.1% uptick. Bear in mind that retail sales figures have been coming in better than expected for three out of the last five months so there’s a good chance of seeing an upside surprise.
However, as I mentioned earlier, the lack of wage growth remains a persistent concern in the U.K. economy and this might be reflected in a bleak spending figure for July. If so, more market participants would be convinced that the slack in the U.K. economy is weighing on its economic performance and might be less inclined to buy the pound.
Are you planning on trading any of these U.K. economic events this week? Don’t be shy to share your trade ideas and insights in our comment box!