Move over, Brexit! The BOE could steal the forex show for pound pairs this week, although no major changes are eyed.
U.K. July GDP (Sept. 10, 8:30 am GMT)
But before BOE head honcho Carney and his gang of policymakers take center stage, the U.K. economy will be releasing its monthly GDP reading for July. This should help market watchers get a better idea of how growth has been faring throughout the quarter and whether the bottom line figures could turn out well or not.
For the month of July, the U.K. economy is expected to have expanded by 0.2%, faster than the earlier 0.1% uptick. This should set a slightly more positive pace for the start of Q2, which might gain more momentum in the months ahead.
However, a weaker than expected read could remind traders that Brexit uncertainties are starting to weigh on economic performance, particularly when it comes to business investment. Recall that manufacturing and services PMI readings have dipped for this particular month.
Pound traders will likely turn their attention to manufacturing and industrial production figures also due then, along with the goods trade balance, as this could provide a better glimpse of how businesses are behaving recently.
Number crunchers predict that manufacturing production slowed from 0.4% in June to 0.2% in July while industrial production could print similar results.
BOE policy statement and MPC minutes (Sept. 13, 11:00 am GMT)
No actual changes to interest rates or asset purchases are eyed this time and MPC members likely voted unanimously to hold. Market watchers would likely keep their eyes and ears peeled for any changes in tone during Carney’s testimony.
Recall that the BOE Guv’nah previously mentioned that a “no deal” Brexit could prompt a review of their policy bias since they haven’t incorporated this scenario in their forecasts yet. In the latest BOE Inflation Report hearings, though, his tone was more or less reassuring since he promised he’d stay on as central bank head throughout the transition period.
Last Week’s Price Review
The pound was outpaced by the Swissy but is still on course to closing out the week in second place (as of 2 pm GMT).
The pound may therefore be boasting its third consecutive week of net wins soon enough. And GBP bulls can thank easing Brexit-related uncertainty for that.
The pound actually had a rather poor start since all GBP pairs gapped lower when the new trading week opened, thanks to E.U. Chief Brexit Negotiator Michel Barnier’s comments over the weekend that he’s “strongly opposed” to British PM Theresa May’s Brexit plan.
And more pain came the pound’s way when the U.K.’s manufacturing PMI report failed to meet expectations.
The pound steadily weakened after that before finally finding support a few hour before BOE Guv’nah Carney and company testified at the Inflation Report Hearings in Parliament.
Incidentally, the hearings were mostly a dud since Carney and friends didn’t really say anything new. Well, Carney did say that he’s willing to stay on as the BOE’s Final Boss character, which is new.
Anyhow, the pound later began to attract buyers when reports began to make the rounds during Tuesday’s U.S. session that the E.U. is supposedly willing to make concessions in Brexit negotiations, particularly with regard to the Irish border issue.
The pound eventually turn broadly lower again come Wednesday, though. And as noted in Wednesday’s London session recap, there were no apparent catalysts and the U.K.’s services PMI reading even came in better-than-expected. However, I also noted back then that market analysts were blaming the pound’s slide on lingering Brexit-related jitters, but no catalysts were cited.
At any rate, the pound began to attract buyers again apparently because of a Reuters report that claimed that the Christian Social Union (CSU), sister party of Angel Merkel’s Christian Democratic Union (CDU), supposedly want to avoid a “hard” Brexit, as well as closer ties with the U.K.
That was apparently only a harbinger of things to come since a torrent of buyers would later charge in during Wednesday’s U.S. session. And as noted in Wednesday’s U.S. session recap, that was due to a Bloomberg report which cited unnamed sources as claiming that the U.K. and Germany are supposedly willing to drop key demands to facilitate a Brexit deal.
Both the British and German governments would later state that their respective positions were unchanged though, so the pound’s rally quickly ran out of steam and GBP pairs began to trade roughly sideways.
No worries, though, since a fresh Brexit-related catalyst later emerged on Friday. And as noted in Friday’s London session recap, that catalyst was the transcript of E.U. Chief Brexit Negotiator Michel Barnier’s discussion with British MPs on Monday since the transcript had a generally conciliatory tone.