Last Week’s UK Economic News Review

Sterling rallied sharply against both the U.S. Dollar and the Euro last week as risk appetite favoured Sterling over both currencies and despite mostly lower than expected economic data seen out of the UK. The UK calendar began the week with Net Lending to Individuals on Monday, increasing +5.3B m/m, in line with expectations.

Tuesday saw the release of Manufacturing PMI, which printed at 50.8, its lowest reading since April of 2013. Rob Dobson, senior economist at Markit said that, “The breadth of the slowdown is especially worrisome, the domestic market is showing signs of weakening while export business continued to fall.” On Wednesday, UK Construction PMI printed at 54.2 compared to an expectation of 55.5, with Services PMI on Thursday showing a print of 52.7 versus 55.1 expected. Also out on Thursday was Halifax HPI, which showed a decline of -1.4% m/m, significantly lower than the increase of +0.1% that was expected.

The U.S. economic calendar was fairly busy last week and began with Tuesday’s release of ISM Manufacturing PMI, which printed at 49.5 versus 48.5 expected. Wednesday saw ADP Non-Farm Employment Change increase to +214K versus +185K expected, and Crude Oil Inventories, showing +10.5M compared to +2.5M expected. On Thursday, ISM Non-Manufacturing PMI printed at 53.4, in line with expectations, while Weekly Initial Jobless Claims rose to 278K new applicants in its latest week compared to an expectation of 271K.

The week concluded with Average Hourly Earnings, which showed contracting growth of -0.1%, notably lower than the +0.2% that was expected. Also U.S. Non-Farm Payrolls increased to +242K in February, notably more than the +195K that was expected with the previous number upwardly revised from +151K to +172K.

The Eurozone’s economic calendar was light last week and began with Monday’s release of German Retail Sales, which increased +0.7% m/m versus +0.3% expected. Also out on Monday was Eurozone CPI Flash Estimate, which declined -0.2% y/y compared to an expected flat reading, and Core CPI Flash Estimate, showing an increase of +0.7% versus +0.9% anticipated. Tuesday had German Unemployment Change, which declined -10K as widely anticipated.

The week concluded with comments from ECB President Draghi saying that monetary policy will be reviewed at the upcoming meeting this week, he stated that, “The review has to be seen against the background of increased downside risks to the earlier outlook amid heightened uncertainty about emerging market economies’ growth prospects, volatility in the financial and commodity markets, and geopolitical risks. In this environment, euro area inflation dynamics continue to be weaker than expected.”

Overall, GBP/USD began the week at 1.3862 and concluded the week +2.6% higher at 1.4219, while EUR/GBP declined from 0.7874 to close the week -1.9% lower at 0.7727.

Key UK, U.S. and Eurozone Economic Data Releases for the Coming Week

GBP: The economic calendar for the United Kingdom will again be moderately active this week. Monday has a talk by MPC Member Haldane scheduled, and Tuesday offers talks by MPC Member Weale and BOE Governor Carney. On Wednesday, Manufacturing Production is due out at 0.2% and MPC Members Broadbent and Cunliffe will talk. Friday will conclude the week’s highlights with the Trade Balance, which is due out at -10.3B.

USD: The economic calendar for the United States is considerably quieter this week. Monday has talks by by FOMC Members Brainard and Fischer scheduled. Wednesday’s data includes Crude Oil Inventories for which the last result was 10.4M. Thursday will offer Weekly Initial Jobless Claims due out at 272K, and Friday’s highlights will include Import Prices due out at -0.7%.

EUR: The Eurozone’s economic calendar will again be unusually quiet this coming week. Monday features German Factory Orders due out at -0.4% and the Eurogroup Meetings. Tuesday has the ECOFIN Meetings on calendar, while Thursday finishes off the week with the ECB Press Conference and the ECB’s Minimum Bid Rate Decision that is expected to remain unchanged at 0.05%.

Sterling Technical Forecast, Spot Rates and Major Chart Points:

GBP/USD weekly forecast: higher
Resistance: 1.4234/47, 1.4351/96 and 1.4569/77.
Spot Rate: 1.4205
Support: 1.4148/72, 1.4041/79 and 1.3877.

EUR/GBP weekly forecast: lower
Resistance: 0.7755/0.7766, 0.7843/97 and 0.7928.
Spot Rate: 0.7735
Support: 0.7665/0.7716, 0.7525/49 and 0.7415/42.