Positive Brexit updates and a few hawkish BOE remarks here and there lifted sterling’s spirits last week. What does this week hold for pound pairs?
U.K. jobs data (April 17, 9:30 am GMT)
Pound pairs could enjoy their first burst of volatility on Tuesday’s London session as the latest batch of jobs figures will be printed.
For the month of March, the claimant count could post a 13.3K increase, higher than the 9.2K rise in joblessness for the previous month. Nonetheless, the unemployment rate is expected to hold steady at 4.3%.
Traders will also be paying close attention to the average earnings index, which is the three-month rolling average of wage changes for the period ending in February. The reading is slated to rise from 2.8% to 3.0% to signal stronger price pressures and potentially stronger consumer spending as well.
U.K. CPI (April 18, 9:30 am GMT)
The action could heat up mid-week with the release of inflation reports from the United Kingdom. Keep in mind that pound bulls are on the lookout for more confirmation that the BOE might be setting up for another rate hike soon.
Headline CPI is projected to hold steady at 2.7% for March while core reading probably ticked up from 2.4% to 2.5%. PPI input prices, which eventually spill over to consumer inflation, could post a 0.4% rebound after the earlier 1.1% drop.
U.K. retail sales (April 19, 9:30 am GMT)
Last but certainly not least is the retail sales report due on Thursday’s London session. This might not generate such a strong reaction compared to the earlier two reports, unless the actual figure posts a huge upside or downside surprise.
Analysts are expecting to see a 0.5% drop in retail sales, though, possibly leading BOE policymakers to think about reining in price pressures in order to keep these from further weighing on consumer spending.
Last Week’s Price Review
The pound edged out a win against the Kiwi and is currently the third-best performing currency of the week (as of 2 pm GMT), which is the same ranking as last week.
Like the euro, the pound also had a mixed start before finally having some semblance of uniformity when BOE MPC Member Ian McCafferty said in an interview that the BOE “shouldn’t dally when it comes to tightening policy modestly.”
McCafferty’s hawkish comment apparently didn’t have a lot of sticking power, though, since the pound’s price action became mixed again a few hours later.
The pound’s price action became uniform again on Wednesday when the pound dipped after the U.K. released a slew of economic reports that mostly failed to meet the market’s expectations.
Thankfully (for pound bulls), the damage was only limited and the pound quickly went into hibernation mode and traded sideways.
The pound woke up again on Thursday, apparently because pound bulls charged in when Brexit Secretary David Davis was speaking, likely because of easing Brexit-related jitters since Davis said that the U.K. and the E.U. are working hard to have a Brexit deal by October. And this Brexit-deal will supposedly include a post-Brexit trade framework, which will have “quite a lot of detail.”
Other than that, Davis also talked about the benefits of Brexit, namely the “ability to strike free-trade deals elsewhere.” In addition, Davis also tried to soothe Brexit fears by saying that the U.K.’s new immigration policy will result in “free movement of brain power,” which will supposedly be good for businesses.
Aside from easing Brexit-related jitters, market analysts also pointed to technical breakouts, particularly the technical breakout on EUR/GBP, as supposedly pushing the pound higher.
Those same market analysts also pointed to possible preemptive positioning ahead of top-tier U.K. data next week, as well as growing confidence that the BOE will be hiking again come May, as reasons for the pound’s rise.
In fact, the pound’s rise on Friday was attributed to those drivers since there wasn’t really any major positive catalysts for the pound on Friday.