Mixed data and resurfacing Brexit concerns left the pound with mixed price action for the previous week. Can the top-tier catalysts this week lead to clearer direction?
U.K. jobs data (Feb. 21, 9:30 am GMT)
The U.K. already released two parts (CPI and retail sales) of its top-tier data trifecta last week, and the remaining component or the jobs report is due this week.
Now it’s worth noting that CPI indicated sustained price pressures for January while the retail sales report posted a smaller than expected rebound for the same month. The employment figures could provide more insight on why this is the case, so analysts might be keeping extra close tabs on wage growth to see if this factor is to blame.
You see, the U.K. jobs release features three parts: the claimant count change, the unemployment rate, and the average earnings index. Claimant count could increase by 2.3K, which would be lower than the earlier 6.8K rise in joblessness, while the unemployment rate could hold steady at 4.3%. The average earnings index could also stay unchanged for the three-month period ending in December.
BOE Inflation Report hearings (Feb. 21, 2:15 pm GMT)
The Super Thursday earlier this month included the release of the BOE Inflation Report, which contained revised economic forecasts from the central bank. In particular, policymakers upgraded both growth and inflation forecasts for this year and the next, while opening the door for two more potential hikes.
This time, BOE officials will be shedding more light on these estimates as they testify before Parliament’s Treasury Committee. Expect additional volatility even hours before the actual event as pound traders could set their orders early in anticipation of more hawkish remarks.
Last Week’s Price Review
The pound is currently mixed for the week (as of 3 pm GMT). And as with most of the other currencies, pound pairs were also mostly range-bound for the week.
The pound initially had mixed start but showed signs of perking up when the U.K.’s December CPI report printed better-than-expected numbers and met the BOE’s forecast of +3.0% year-on-year to boot.
However, there was no follow-through buying and the pound ended up trading sideways after that. No clear reason why, though, and market analysts were silent on the issue, focusing only on the pound’s immediate reaction to the CPI report instead.
Anyhow, the pound later began to encounter broad-based selling pressure during Wednesday’s Asian session and the earlier half of Wednesday’s morning London session.
There were also no clear catalysts, but as noted in Wednesday’s London session recap, market analysts were blaming the pound’s slide on jitters ahead of Boris Johnson’s speech since Johnson is a well-known Brexiteer, so there were fears that his speech would weaken faith in a transition deal.
As it turns out, however, Johnson tried to sound conciliatory in his speech, so the pound began to find support.
Instead of rising, however, the pound’s price action became a mixed mess in the wake of the U.S. CPI report before finally steadying when Thursday’s Asian session rolled around.
The pound began to find buyers during Thursday’s late Asian session until early U.S. session, though. But as noted in Thursday’s London session recap, there were no direct catalysts for the pound’s strength. Although some market analysts tried to attribute the pound’s strength on the Greenback’s weakness.
Sadly for pound bulls, the pound was forced to give back its gains and ended up having a mixed performance for the week (as of 3 pm GMT), thanks to the U.K.’s disappointing retail sales report.