Last Week’s UK Economic News Review

Sterling gained against both the U.S. Dollar and the Euro last week as the FOMC Meeting Minutes suggested members were more inclined towards a rate increase in June, while the ECB’s Monetary Policy Meeting Accounts noted that, “patience was needed” for the central bank’s stimulus measures to impact inflation and the Eurozone’s economy.

UK numbers began on Tuesday with CPI, which increased +0.3% y/y compared to an expectation of +0.5%. Also out were PPI Input, which increased +0.9% m/m versus +1.1% expected, and RPI, which rose +1.3% versus the +1.6% rise anticipated. Wednesday saw UK Claimant Count Change, which showed a decline of -2.4K, significantly better than the +4.0K increase that was expected. Nevertheless, the previous number was upwardly revised from +6.7K to +14.7K, while UK Unemployment held steady at 5.1%. Also out was the UK Average Earnings Index, which increased +2.0% 3m/y versus an expected increase of +1.7%. The calendar concluded with Thursday’s release of UK Retail Sales, which increased +1.3% m/m versus +0.6% anticipated. 

The U.S. economic calendar showed moderate activity last week, beginning with Monday’s release of the Empire State Manufacturing Index, which printed at -9.0 and came out significantly worse than the expected reading of +7.2. Tuesday had CPI, which increased +0.4% m/m versus +0.3% expected, and Core CPI, which increased by +0.2%, as was widely anticipated. On Wednesday, the FOMC Meeting Minutes noted that, “Members generally agreed that, in light of the recent weak readings on spending and production, and with inflation below the Committee’s objective, it would be prudent to wait for additional information bearing on the medium-term outlook before deciding whether to raise the target range for the federal funds rate.”  

Thursday saw the release of the Philly Fed Manufacturing Index, which showed a reading of -1.8 that was significantly lower than the +3.2 print expected. Also, Weekly Initial Jobless Claims showed a rise of 278K claims, which was in line with expectations. The week concluded with Existing Home Sales showing an annualized 5.45M rise versus the 5.40M expected.

The EU economic calendar commenced with Wednesday’s release of EZ Final CPI, which showed a decline of -0.2% y/y, as was widely anticipated. Thursday saw the release of the ECB Monetary Policy Meeting Accounts, which noted that, “It was highlighted that the monetary stimulus introduced since mid-2014 had led to a significant and broad-based easing in borrowing conditions for the economy as a whole. Further improvements in financing conditions had been seen following the adoption of the comprehensive measures at the early-March monetary policy meeting.”

Overall, GBP/USD began the week at 1.4349 and concluded the week +1.0% higher to close at 1.4496, while EUR/GBP declined from 0.7870 to close the week -1.7% lower at 0.7734.

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

GBP: The economic calendar for the United Kingdom remains fairly quiet this week. After a quiet Monday, Tuesday offers Public Sector Net Borrowing due out at 6.3B, as well as the Inflation Report Hearings. Thursday’s highlights then include the Second Estimate GDP expected to print at 0.40% and Preliminary Business Investment for which a 3.20% result is anticipated.

USD: The economic calendar for the United States remains somewhat active this week. The week’s highlights start on Monday with a talk by FOMC Member Bullard, while Tuesday offers New Home Sales that are expected to come out at 521K.  Wednesday has Crude Oil Inventories that last printed at 1.3M plus the Goods Trade Balance due out at -60.1B. Thursday’s highlights include a talk by FOMC Member Bullard;  Core Durable Goods Orders and Durable Goods Orders that are both due out at 0.30%; Weekly Initial Jobless Claims expected to print at 275K; and Pending Home Sales for which a 0.60% result is anticipated. The week concludes on Friday with the release of Preliminary GDP due out at 0.80%, the Revised University of Michigan Consumer Sentiment survey for which a 95.7 result is expected, and a talk by Fed Chair Yellen.

EUR: The Eurozone’s economic calendar heats up considerably this coming week. The week’s highlights start off on Monday with French, German and Eurozone Flash Manufacturing PMI due out at 49, 52.1 and 51.9, in addition to French, German and Eurozone Flash Services PMI due out at 50.8, 54.6 and 53.3 respectively. Tuesday then features the German and Eurozone ZEW Economic Sentiment surveys expected out at 12.1 and 23.4 respectively, in addition to the Eurogroup Meetings.  The week’s highlights conclude on Wednesday with the ECONFIN Meetings and the German Ifo Business Climate survey expected out at 106.90.

Sterling Technical Forecast, Spot Rates and Major Chart Points:

GBP/USD weekly forecast: lower
Resistance: 1.4529/1.4542, 1.4637/69 and 1.4768.
Spot Rate: 1.4505
Support: 1.4467/78, 1.4205/1.4337 and 1.4004/1.4130.

EUR/GBP weekly forecast: higher
Resistance: 0.7811/61, 0.7919/0.8065, 0.8116 and 0.8152/57
Spot Rate: 0.7743
Support: 0.7648/0.7734, 0.7442/0.7525 and 0.7415/23.