Last Week’s UK Economic News Review

Sterling gained against both the U.S. Dollar and the Euro last week as geopolitical tensions increased between the United States and North Korea, U.S. President Trump talked down the Greenback while all three economies reported mixed economic data.

The UK economic calendar was moderately busy last week, beginning on Tuesday with CPI, which increased by +2.3% y/y, edging the street expectation of +2.2%, also, PPI Input increased by +0.4% m/m compared to an expected decline of -0.5%, and RPI, which increased by +3.1%, in line with expectations.

BOE Governor Mark Carney, speaking at the Fintech conference in London noted on Wednesday that, “New technologies could transform wholesale payments, clearing and settlement. In particular, distributed ledger technology could yield significant gains in the accuracy, efficiency and security of such processes, saving tens of billions of pounds of bank capital and significantly improving the resilience of the system.”  Also out on Wednesday was the UK Average Earnings Index, which increased by +2.3% 3m/y, beating the market consensus of +2.1%.

The week concluded with the BOE’s Credit Conditions Survey, in which the bank noted that capital spending by firms had decreased -1.5% in 2016, as companies cut spending in light of the Brexit vote last summer. The BOE said that, “Lower capital investment was reported to be exerting a significant drag on demand for corporate lending in Q1, although increased merger and acquisition activity had pushed up on demand”.

The U.S. economic calendar was moderately busy last week, beginning on Monday with a speech by Fed Chair Janet Yellen, speaking at the University of Michigan, Yellen said that the U.S. economy was close to full employment and two percent inflation, with the next rate hike expected in June. On Wednesday, U.S. President Donald Trump made a complete 180 on his stance on NATO, Trump stated that, “The secretary general and I had a productive conversation about what more NATO can do in the fight against terrorism, I complained about that a long time ago, and they made a change. Now they do fight terrorism. I said it was obsolete. It’s no longer obsolete.”

Thursday saw PPI decline by -0.1% m/m compared to an expected flat reading, while Weekly Initial Jobless Claims fell to 234K versus an expectation of 242K, and the Preliminary University of Michigan Consumer Sentiment index, which printed at 98.0, beating the consensus of a 97.2 print. The week concluded with Friday’s release of CPI, which declined by -0.3% m/m versus an expected flat reading, Core CPI, which declined by -0.1% compared to an expected increase of +0.2%, Core Retail Sales, which showed a flat reading compared to an expected increase of +0.2%, and Retail Sales, which declined by -0.2% m/m versus an expected increase of +0.1%.

The Eurozone economic calendar was extremely light last week, and was limited to Tuesday’s release of German ZEW Economic Sentiment, which printed at 19.5, beating the market consensus of a 13.2 reading, and the G7 meetings, British Foreign Secretary Boris Johnson said at the meeting that, “If you think about the position of Vladimir Putin now, he’s toxifying the reputation of Russia by his continuing association with a government which has flagrantly poisoned its own people”

Overall, GBP/USD began the week at 1.2377 and concluded the week +1.2% higher to close at 1.2522, while EUR/GBP opened at 0.8541 and closed the week -0.9% lower at 0.8465.

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

GBP: The economic calendar for the United Kingdom remains quiet this coming week. After a Bank Holiday on Monday, Thursday has talks by BOE Governor Carney featured, while Friday offers Retail Sales, for which a -0.30% result is anticipated), plus a talk by MPC Member Saunders.

USD: The economic calendar for the United States remains moderately active this coming week. Monday offers the Empire State Manufacturing Index that is expected to print at 15.2, while Tuesday features Building Permits, Housing Starts, the Capacity Utilization Rate, and Industrial Production that are expected out at 1.25M, 1.25M, 76.30% and 0.50% respectively. On Wednesday, key releases include Crude Oil Inventories for which the last result was -2.2M, and Thursday then offers the Philly Fed Manufacturing Index and Weekly Initial Jobless Claims due out at 25.6 and 241K, followed by a talk by Treasury Secretary Mnuchin. Friday’s highlights will include a talk by FOMC Member Kashkari, as well as Existing Home Sales for which a 5.61M result is anticipated.

EUR: The Eurozone’s economic calendar warms up considerably this coming week. After a Bank Holiday in France, Germany and Italy on Monday, Wednesday offers Final CPI for which a 1.50% result is expected. Thursday is quiet, then Friday finishes off the week with French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, EZ Flash Manufacturing PMI, and EZ Flash Services PMI for which results of 53.2, 57.2, 58.1, 55.5, 56.1 and 56 are respectively expected.

Sterling Technical Forecast, Spot Rates and Major Chart Points:

GBP/USD weekly forecast: higher
Resistance: 1.2530/1.2614, 1.2672/1.2727 and 1.2774.
Spot Rate: 1.2530
Support:  1.2505, 1.2346/1.2451 and 1.2081/1.2213.

EUR/GBP weekly forecast: lower
Resistance: 0.8485/0.8510, 0.8579/0.8663 and 0.8734/86.
Spot Rate: 0.8470
Support:  0.8402/0.8469, 0.8299/0.8330 and 0.8248.