Gather ’round, pound traders! It’s gonna be another blockbuster week for the U.K. as several top-tier catalysts are scheduled over the next few days. Better start reading up on what each event is all about and how they might turn out.
1. U.K. inflation reports (Jan. 17, 9:30 am GMT)
In one of his recent speeches, BOE Governor Carney acknowledged that price levels are rising faster than initially anticipated, owing mostly to the steady depreciation of the pound over the past few months. This followed a stronger than expected November CPI reading of 1.2%, up from the earlier 0.9% figure and higher than the projected 1.1% reading. The core CPI also beat expectations by advancing from 1.2% to 1.4%.
Keep in mind that these inflation readings matter to the U.K. central bank because their mandate is to maintain price stability. Carney has mentioned that his tolerance for higher price levels is limited, and stronger inflationary pressures could prevent market watchers from speculating about additional easing even with Brexit risks on the horizon.
For the month of December, headline CPI is expected to climb from 1.2% to 1.4% while the core reading could hold steady at 1.4%. Other inflation indicators such as the RPI or retail price index and the PPI are also expected to post gains for the month while the HPI or house price index might slide from 6.9% to 6.3% in keeping with the slowdown in property price gains recently.
2. Prime Minister May’s speech (Jan. 17)
Apart from the latest Sherlock episode, the main event for the Brits this week is U.K. Prime Minister May’s Brexit vision speech on January 17. She is expected to outline the government’s game plan for negotiations with the EU, particularly when it comes to trade agreements and immigration controls.
To be specific, forex junkies are counting on her to reiterate that the U.K. will be prepared to forego access to the single European market in exchange for having more control over immigration and not being subject to the rulings of the European Court of Justice. This scenario has been dubbed as a “hard Brexit” and is foreseen to do more harm than good to the U.K. economy, even as May has attempted to reassure that they will “make the best of Brexit.”
To do so, May plans on turning the attention towards pursuing common goals such as trade deals with other nations and protecting workers’ rights while reducing divisiveness between the “Leave” and “Remain” camps. But unless she is able to convince pound traders that the U.K. can emerge a much stronger nation post-Brexit, gloom and doom could set in and drag sterling down. Just be mindful of potential buy-the-rumor-sell-the-news action!
3. U.K. jobs data (Jan. 18, 9:30 am GMT)
Next up, we’ve got the claimant count change due midweek, along with the average earnings index and unemployment rate. The previous release churned out stronger than expected results, reflecting a 2.4K rise in joblessness versus the projected 6.2K increase and the earlier 13.3K gain. Wage growth showed stronger momentum as the average earnings index ticked up from 2.4% to 2.5% in the three-month period ending in October while the unemployment rate stayed at its record-low of 4.8%.
For the month of December, the claimant count change could come in at 4.6K to indicate a slightly faster increase in unemployment. More upside is seen for wages, with the average earnings index projected to rise to 2.6%, and the unemployment rate could hold on to the 4.8% mark.
4. U.K. retail sales
Before the week comes to a close, the U.K. is set to print its December retail sales report and might print a 0.1% DECLINE in consumer spending. After all, rising price levels are probably starting to take their toll on purchasing power, leading some consumers to rethink their purchases or substitute cheaper goods so they can stick to their budget.
If so, this would mark the first drop in retail sales since August last year when Brits scaled back their purchases of household goods, clothing and footwear. Depending on how the previous U.K. events turn out, this could remind pound traders of how Brexit issues are starting to impact economic performance and how things could turn out once the negotiations officially start.
Are you planning on trading the pound this week? Don’t be shy to share your market bias and trade ideas in our comments section below!
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