Can this week’s set of top-tier economic releases take the spotlight away from Brexit fears? Or will they confirm that the economy is on shakier ground?
Employment reports (Aug. 14, 8:30 am GMT)
To kick start an economic event-filled week for the British pound, we’ve got the employment figures lined up on Tuesday’s London session.
As always, this set includes the claimant count change, unemployment rate, and average earnings index. The claimant count reflects the number of folks claiming unemployment-related benefits in the previous month (in this case, July) and is the first gauge of the employment situation for the economy.
The unemployment rate is the percentage of the work force that is jobless and actively seeking employment, but this tends to be a lagging indicator as it shows stats 45 days after the month ends (in this case, June). This figure is expected to hold steady at 4.2% for that period.
Lastly, the average earnings index is the three-month rolling average of wage changes up until 45 days after the month ends (still June in this case) but it is often considered a leading indicator for spending and inflation. After all, a faster pace of growth in salaries could mean more moolah to spend and also higher costs for businesses, which they then pass on to consumers. No changes from the 2.5% reading are expected this time.
Inflation figures (Aug. 15, 8:30 am GMT)
Moving on to the next set of top-tier reports, we’ve got the inflation figures lined up for Wednesday’s London session. This includes the headline and core CPI, as well as helpful components such as the PPI, RPI, and HPI.
Headline CPI is expected to tick higher from 2.4% to 2.5% to reflect a slightly stronger pickup in price levels while the core version of the report could hold steady at 1.9%. Producer input prices could post a meager 0.1% uptick, slower than the earlier 0.2% gain, while producer output prices might also post another 0.1% uptick.
The RPI or retail price index, which looks at goods bought for the purposes of consumption and thus gauges price changes for households, could hold steady at 3.4%. Lastly, the house price index could dip from 3.0% to 2.8%.
Retail sales data (Aug. 16, 8:30 am GMT)
Lastly, the retail sales report that basically measures consumer spending in the U.K. is due on Thursday’s London session. Analysts are expecting to see a 0.2% rebound for July after a 0.5% slide seen last June.
Some expect FIFA-related purchases (Harry Kane jerseys and other football team merch, beers, and more beers) to give a one-off boost to July retail sales. But even if the actual figure does beat expectations by a wide margin, traders might be keen to strip off the World Cup fever effect to see how consumers are really faring.
Last Week’s Price Review
The pound is on track for its fourth consecutive week of losses since the pound is currently the second biggest loser of the week yet again (as of 2 pm GMT).
The week’s not over yet and the Kiwi is closing the gap, so there’s even a chance that the pound may end up as this week’s biggest loser.
The pound showed weakness right from the start. There were no apparent catalysts on Monday, but as noted in Monday’s London session recap, the pound’s weakness was likely just an extension of last week’s themes, namely Brexit-related jitters and the BOE’s disappointing forward guidance.
However, I also noted that some market analysts were blaming the pound’s slide to British International Trade Secretary Liam Fox’s comment over the weekend that he (Fox) thinks that “the intransigence of the [European] commission is pushing [the U.K.] towards no deal,” adding that he sees a “60-40” chance of a “no deal” Brexit scenario.
In any case, the pound eventually steadied before finding more sellers when Tuesday’s London session rolled around.
And as pointed out in Tuesday’s London session recap, there were no fresh catalysts, so I conjectured that the pound was still being weighed down by last week’s themes.
After that most GBP pairs (except GBP/CAD) drifted lower until another wave of sellers rushed the pound during Wednesday’s London session recap.
And as I noted in Wednesday’s London session recap, there were still no fresh negative catalysts, but I also noted that market players were still pointing to the “bigger picture” themes from last week, so weaker BOE rate hike expectations and Brexit worries.
The pound would finally get a chance to lick its wounds during Thursday’s London session. And that was apparently due to a Business Insider report that claimed that E.U. leaders are supposedly ready and willing to offer concessions to British PM Theresa May “by allowing Britain to remain in the single market for goods while opting out of the free movement of people.”
As an interesting side note, I also pointed out in Thursday’s London session recap that the Business Insider report was actually based on a report from The Times, which was released a little over 10 hours earlier. However, the Times report had a paywall, so it didn’t gain traction until after Business Insider’s report.
Getting back on topic, the pound continued to move higher against all its peers before becoming more mixed when Thursday’s U.S. session rolled around.
Selling pressure did return on Friday, though. And as mentioned in Friday’s London session recap, Brexit-related worries and a stronger Greenback were being blamed for the pound’s weakness. And they were apparently more than enough to quash any optimism from the net positive U.K. data released on Friday.