There are plenty of top-tier catalysts lined up from the U.K. this week, so pound pairs might be in for a volatile one. Did we mention the BOE decision is coming up?
BOE Governor Carney’s speech (June 18, 2:00 pm GMT)
Sterling price action could start picking up early in the week as BOE head honcho Carney is set to participate in a panel discussion at the ECB Forum on Central Banking in Portugal.
Since the BOE decision is scheduled later in the week, traders are likely to hang on to Carney’s every word, especially if he’s asked questions on Brexit and interest rates. Any clues on whether the central bank is shifting its policy bias could lead to pricing in ahead of the BOE event.
U.K. inflation reports (June 19, 8:30 am GMT)
The release of the U.K. inflation reports could also provide some hints on how the BOE announcement might turn out. After all, the central bank’s mandate is to maintain price stability.
Headline CPI is projected to have dipped from 2.1% to 2.0% in May while the core version of the report probably slipped from 1.8% to 1.6%. Weaker than expected data could revive easing expectations, given how the U.K. economy might also need more stimulus with Brexit looming.
Producer prices, which are considered leading indicators of overall inflation, are also expected to show weakness. Input prices could print a meager 0.2% uptick after the earlier 1.1% gain while output prices might also post a bleak 0.2% increase.
U.K. retail sales (June 20, 8:30 am GMT)
Next up, we’ve got the U.K. retail sales report which would more or less show a picture of consumer spending, which in turn accounts for a huge chunk of overall growth.The month of May isn’t exactly expected to paint a rosy picture, though, as retail sales are projected to have fallen by 0.5% after posting a flat reading in the previous month. A larger than expected dip could signal that uncertainties are leading Brits to keep their hands in their pockets.
Take note, however, that this release comes a few hours ahead of the BOE decision so the reaction might be muted.
BOE policy statement & MPC minutes (June 20, 11:00 am GMT)
And now for the main event! The BOE is slated to announce their decision to keep interest rates on hold at 0.75% and asset purchases unchanged at 435 billion GBP in a unanimous decision.
It wouldn’t be a huge surprise to see the BOE hold on to its cards for now and refrain from making any drastic moves while Brexit uncertainties remain. As of this writing, U.K. PM hopefuls are clashing over the exit strategy and the risk of a “no deal” breakup is still in play.
In their previous statement, the BOE downgraded its inflation forecast while upgrading its growth estimates. It did clarify that the future path of interest rates hinges on the Brexit transition, although Carney pointed out that investors are underestimating the possibility of a hike. Talk about mixed signals!
Missed last week’s price action? Read GBP’s price recap for June 10-14!