Last Week’s UK Economic News Review

Sterling gained against the U.S. Dollar but declined against the Euro last week as UK PM Theresa May responded to the EU’s approval for Brexit negotiation guidelines. In addition, the U.S. FOMC left interest rates unchanged, and Emmanuel Macron won the election for president of France on Sunday with around 65 percent of the votes.

The UK economic calendar was light last week, beginning on Monday with PM Theresa May rejecting Brussel’s hardline Brexit demands, stating that, “What matters sitting around that table is a strong Prime Minister of the United Kingdom, with a strong mandate from the people of the United Kingdom which will strengthen our negotiating hand to ensure we get that possible deal.  Also on Monday, former UK Prime Minister Tony Blair announced he would return to politics, saying that, “this Brexit thing has given me a direct motivation to get more involved.” On Tuesday, Manufacturing PMI printed at 57.3 compared to an expectation of 54.0. Wednesday saw Construction PMI print at 53.1 versus 52.1 expected. The week concluded with Thursday’s release of Services PMI, which printed at 55.8 versus the 54.6 anticipated.

The U.S. economic calendar was moderately busy last week, beginning on Monday with ISM Manufacturing PMI, which printed at 54.8 compared to an expected reading of 56.6. On Wednesday, ADP Non-Farm Employment Change showed +177K, which was in line with expectations. Also, ISM Non-Manufacturing PMI printed at 57.5 versus 56.1 expected.

Wednesday also had the FOMC Federal Funds Rate, which was left unchanged at 0.75% – 1.00%. In the FOMC Statement, the central bank noted that, The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term.”

Thursday had Weekly Initial Jobless Claims, which dropped to 238K from 257K with an expectation of 246K. The week concluded with Friday’s release of Non-Farm Payrolls, which showed 211K new jobs versus an expectation of 194K. Also, Average Hourly Earnings increased +0.3% m/m as widely anticipated, and the Unemployment Rate, which fell to 4.4% from 4.5%, its lowest level in more than a decade.

The Eurozone economic calendar was light last week, beginning on Tuesday with Spanish Manufacturing PMI, which showed a reading of 54.5, in line with expectations. On Wednesday, German Unemployment Change declined -15K versus an expected -10K. The week concluded with Thursday’s release of Spanish Unemployment Change, which showed a decline of -129.3K versus -78.2K expected. The week’s big news was Sunday’s French Presidential election, which had centrist Emmanuel Macron defeat right wing candidate Marine LePen with 65% of the vote.

Overall, the US Dollar exchange rate versus sterling began the week at 1.2928 and concluded the week +0.4% higher to close at 1.2977, while EUR/GBP opened at 0.8423 and closed the week 0.6% higher at 0.8471, nevertheless, the pair was still 41 pips higher on the week.

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

GBP: The economic calendar for the United Kingdom warms up this coming week. Monday has the Halifax HPI expected out at 0.10%.  Thursday then has Manufacturing Production and the Goods Trade Balance due out at -0.20% and -11.6B. In addition, the MPC’s Official Bank Rate Decision and Votes are expected to leave rates unchanged at 0.25% with a vote of 1-0-8. The Asset Purchase Facility is also expected to remain unchanged at 435B by an MPC vote of 0-0-9. Also scheduled for release will be the BOE Inflation Report and the Monetary Policy Summary. Friday features the start of the G7 Meetings that will run until Saturday.

USD: The economic calendar for the United States remains active this coming week. Starting on Tuesday, releases include JOLTS Job Openings due out at 5.67M and Mortgage Delinquencies for which the last result was 4.80%. In addition, FOMC Member Kaplan will give a talk. Wednesday features Import Prices that is expected to print at 0.20% and Crude Oil Inventories for which the previous result was -0.9M. Thursday then offers a talk by FOMC Member Dudley, as well as PPI, Weekly Initial Jobless Claims, and Core PPI for which results of 0.20%, 245K and 0.20% are anticipated. Friday’s highlights will include CPI, Core CPI, Core Retail Sales, Retail Sales and the Preliminary University of Michigan Consumer Sentiment survey that are respectively due out at 0.20%, 0.20%, 0.50%, 0.60% and 97, as well as talks by FOMC Members Harker and Evans and the initial day of the G7 Meetings that will conclude on Saturday.

EUR: The Eurozone’s economic calendar remains fairly busy this coming week and euro exchange rates are expected to shift as a consequence. Sunday featured the French Presidential Election in which centrist Emmanuel Macron took around 65% of the vote. Monday is a French Bank Holiday; Wednesday will offer a talk by ECB President Draghi; and Thursday has the EU Economic Forecasts scheduled for release. Friday then concludes the week’s data with German Preliminary GDP for which a 0.60% result is anticipated. Also, the G7 Meetings will start on Friday and finish on Saturday.

Sterling Technical Forecast, Spot Rates and Major Chart Points:

GBP/USD weekly forecast: lower
Resistance: 1.2965/83, 1.3057, and 1.3120.
Spot Rate: 1.2960
Support:  1.2902/14, 1.2829/64 and 1.2774.

EUR/GBP weekly forecast: lower
Resistance: 0.8449/0.8529, 0.8579/0.8663 and 0.8734/86.
Spot Rate: 0.8445
Support:  0.8402/0.8404, 0.8299/0.8330 and 0.8248.