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UK Inflation, Unemployment and Retail Sales in focus this week

14th August 2017 Market Update

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🇬🇧 GBP – With very little data out last week, much of the moves on Sterling pairs was dictated by its opposing currencies. Sterling finished the week 0.28% lower against the US dollar and 0.7% lower against the euro.

This week looks set to be more productive with inflation data, unemployment figures and retail sales data all hopefully set to give the ailing pound much needed support.

🇪🇺 EUR – Euro demand still seems to be persisting in the markets with US investment bank Morgan Stanley raising its forecasts for the single-bloc currency, predicting it would hit $1.25 early next year and the fact we could see parity against the pound. Data wise there is nothing really significant to mention from last week.

This week we have revised data for 1st quarter economic growth on Wednesday and as well as revised inflation figures on Thursday. The ECB is to publish the minutes of its latest monetary policy meeting.

🇺🇸 USD – The US dollar started the week well following the positive job data from the previous Friday. The currency also drew support on it traditional safe haven status following heightened tensions between the US and North Korea. However, the dollar slid on Friday after weaker than expected inflation once again tempered expectations for a third rate hike this year.

In the week ahead, the Fed will release minutes of its recent policy meeting on Wednesday as well as retail sales data on Tuesday. Markets expect the same rhetoric as before from the Fed with the slowdown in inflation expected to delay when the Fed will next raise rates.

 

 

Key Announcements

🇬🇧 – 15/08/2017 – Inflation, forecast to rise to 2.7%.
16/08/2017 – Unemployment Rate, forecast to remain at 4.5%.
17/08/2017 – Retail Sales, forecast to drop to 1.4%.

🇪🇺 – 16/08/2017 – Revised Q1 GDP, forecast to remain at 2.1%.
17/08/2017 – Inflation, expected to remain at 1.3%.
17/08/2017 – ECB Monetary Policy Meeting.

🇺🇸 – 15/08/2017 – Retail Sales, forecast to rise to 0.3%.
16/08/2017 – FOMC Minutes.
17/08/2017 – Retail Sales, forecast to drop to 1.4%.

 

Our View: Whilst UK unemployment and retails sales may prove to be lackluster, what could be key for any positive moves on the pound could be Tuesday’s inflation readings. A higher print will again cause markets to speculate that a rate hike could well be on the cards by the BoE later this year.

Wednesdays FOMC could well be disappointment with main focus on anything concerning the US being the continued tension between the US and N Korea.

With the US dollar once again on the back foot, flows look set to go back into the euro even though data this week doesn’t look to show any signs of improvement with regards to growth and inflation.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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