Another trading week, another chance to take home some pips! Let’s take a look at three economic releases in the U.K. and how they can affect your pound-related trades this week.
CPI (Feb. 16, 9:30 am GMT)
- Headline CPI expected to rise by 0.3% after 0.2% uptick in December
- Core CPI estimated to rise 1.3% after 1.4% increase last month
Consumer prices in the U.K. rose at their fastest pace since January 2015 in December last year, mostly due to the increase in transportation costs. However, other components such as food, clothing, recreation, and furniture saw significant declines throughout the month. This is probably why Mark Carney wasn’t all unicorns and rainbows over the numbers.
The Bank of England (BOE) head honcho spurred a reversal for most of the pound’s intraweek gains last month when, in a speech in London, he hinted that the numbers won’t compel the BOE to raise its rates. Apparently, the members are holding out for inflation to “notably” get closer to their 2.0% targets as well as see improvements in growth and consumption. Guess we won’t hear louder calls for rate hikes until we see faster inflation rates, huh?
Employment Numbers (Feb. 17, 9:30 am GMT)
- Unemployment rate expected to slip from 5.1% to 5.0%
- Claimant count expected to fall by 3K after 4.3K decline in December
- Average weekly earnings including bonuses to rise by 1.9% after 2.0% rise last month?
- Average weekly earnings excluding bonuses expected to remain at 1.9%
The U.K.’s employment numbers hit the headlines last month when the unemployment rate fell from 5.2% to 5.1% – its lowest level since 2006 – while claimant counts has also pointed to improvements. Unfortunately, market players (and the BOE) were watching wages more closely than the headline numbers.
Wage growth turned out to be more sluggish than the BOE is comfortable with, which lessened the pressure on the central bank to raise its rates. If you recall, Carney and his gang are concerned that consumer prices will rise faster than wages. Until we see significant upticks in weekly earnings, the pound bulls will likely shrug off recoveries in the headline jobs numbers. Hey, at least now you know what to look for when the reports are released!
Retail Sales (Feb 19, 9:30 am GMT)
- Headline retail sales expected to rise by 0.8% from 1.0% decline in December
- Core retail sales to show 0.7% increase from last month’s 0.9% decline?
Cold weather and discounting in the previous months took their toll on retail activity in December, pushing the headline numbers to its biggest drop since September 2014. The disappointing report highlighted the economy’s struggles in getting consumers to spend their moolah and the importance of getting higher wages for consumers.
This time around analysts are expecting a 0.8% uptick for the headline figure and a 0.7% rise for core retail sales activity. Until we see significant increases, though, it’s likely that the retail sales report will support the idea that the U.K.’s economic recovery is losing steam and that the BOE is right to hold off from rate hikes in the near future.
That’s it for the pound watchlist this week! Which report do you think will have the most impact on the pound pairs? Do you think the BOE (read Mark Carney) will step in and try to jawbone the currency some more?