Last Week’s UK Economic News Review

Sterling lost ground against the U.S. Dollar but gained fractionally against the Euro last week. The previous week’s momentum added to the Greenback’s strength, but the Euro came under pressure against both the U.S. Dollar and Pound Sterling. 

The UK economic calendar was moderately busy last week, beginning on Tuesday with CPI, which increased +0.9% y/y compared to an expected increase of +1.1%. Also out on Tuesday was RPI, which showed a reading of +2.0% versus the +2.3% anticipated. Also, PPI Input increased by +4.6% m/m, which was significantly higher than the +1.6% that was expected.

Wednesday saw the release of the UK Claimant Count Change data, which showed +9.8K new claims versus only +1.9K expected, with the previous number significantly revised up from +0.7K to +5.6K. Also out was the Average Earnings Index that showed an increase of +2.3% y/y, which was in line with expectations. The week concluded with Thursday’s release of Retail Sales, which showed an increase of +1.9% m/m versus the +0.5% that was anticipated.

The U.S. economic calendar was moderately busy last week, with Tuesday’s release of Retail Sales and Core Retail Sales both showing an increase of +0.8% m/m versus an anticipated +0.5% and +0.6% respectively . On Wednesday, PPI came out with a flat reading for the month versus an expected increase of +0.3%. The week concluded on Thursday with CPI, which was up +0.4% m/m, in line with expectations, while Core CPI increased by only +0.1% versus an expectation of a +0.2% increase. Also, the Philly Fed Manufacturing Index printed at 7.6 compared to an expected reading of 8.1, and Weekly Initial Jobless Claims showed 235K new claims made compared to an expected 257K.

In testimony before the U.S. Congress, Fed Chair Janet Yellen stated that, “At our meeting earlier this month, the Committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee’s objectives.”

The Eurozone economic calendar was light again last week, beginning on Tuesday with German Preliminary GDP, which increased +0.2% q/q versus the +0.3% that was expected. Also, EZ Flash GDP increased by +0.3%, as was widely anticipated, and German ZEW Economic Sentiment showed an impressive reading of +13.8 compared to an expectation of only +7.9. On Thursday, EZ Final CPI increased by +0.5% y/y, while the ECB Monetary Policy Meeting Accounts noted that , “the Governing Council would be in a better position to take a more complete perspective on the inflation outlook and thereby evaluate the likelihood of inflation not only converging to levels that were closer to 2%”.

The week concluded with a speech by ECB President Draghi, in which he stated that, “the recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support. The ECB will continue to act, as warranted, by using all the instruments available within our mandate to secure a sustained convergence of inflation towards a level below, but close to 2%.”

Overall, GBP/USD began the week at 1.2560 and concluded the week -1.6% lower to close at 1.2352, while EUR/GBP declined from 0.8607 to close the week -0.4% lower at 0.8574.

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

GBP: The economic calendar for the United Kingdom cools down a bit this coming week, starting on Tuesday with Public Sector Net Borrowing that is expected out at 5.9B. Wednesday’s highlights then include the Autumn Forecast Statement, and Friday offers Second Estimate GDP and Preliminary Business Investment that are due out at 0.5% and -0.2% in that order.

USD: The economic calendar for the United States remains quite active this coming week. The week’s economic highlights begin on Tuesday with Existing Home Sales for which the consensus is 5.43M. Wednesday then features the FOMC Meeting Minutes, in addition to Core Durable Goods Orders, Weekly Initial Jobless Claims, Durable Goods Orders, New Home Sales and the Revised University of Michigan Consumer Sentiment survey that are respectively expected out at 0.2%, 241K, 1.2%, 591K and 91.6. Crude Oil Inventories will also be released for which the last result was 5.3M. That concludes the week’s highlights since Thursday will be a U.S. Bank Holiday and Friday is quiet.

EUR: The Eurozone’s economic calendar remains fairly active this coming week, starting on Monday with a talk by ECB President Draghi.  Wednesday then has 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 due out at 51.5, 52.1, 54.8, 54.1, 53.2 and 53.1 respectively. Thursday finishes off the week’s highlights with the German Ifo Business Climate survey for which a 110.6 result is anticipated.

Sterling Technical Forecast, Spot Rates and Major Chart Points:

GBP/USD weekly forecast: higher
Resistance: 1.2556/1.2673, 1.2790/1.2864 and 1.3437/80.
Spot Rate: 1.2360
Support:  1.2226/1.2351, 1.2081/1.2145 and 1.1991.

EUR/GBP weekly forecast: lower
Resistance: 0.8724, 0.8769/0.8814 and 0.8880.
Spot Rate: 0.8595
Support: 0.8525/66, 0.8414 and 0.8299/0.8343.