Last Week’s UK Economic News Review

Sterling gained against both the U.S. Dollar and the Euro as U.S. presidential elections confirmed Republican nominee, Donald J. Trump as the next U.S. president.  The UK economic calendar was relatively light last week, beginning on Tuesday with Manufacturing Production, which increased by +0.6% m/m versus the +0.5% anticipated.

On Wednesday, MPC member Haldane noted in a speech that, “During the crisis, there were sharp swings in asset prices and liquidity premia in many financial markets. Since the crisis, there have been concerns about market-makers’ willingness to make markets, potentially impairing liquidity. These are policy questions which are not easily amenable to existing asset pricing models.” The calendar concluded on Thursday with the UK Goods Trade Balance, which showed a deficit of -12.7B versus the -11.3B anticipated.

The U.S. economic calendar was quiet last week, with Tuesday’s presidential election being the highlight. In a surprise victory, Republican nominee, Donald J. Trump, won a majority of the electoral votes in the presidential election by an unexpectedly wide margin over Democrat Hillary Clinton, although he apparently failed to win the popular vote. In a speech after his victory, Trump stated that, “As I’ve said from the beginning, ours was not a campaign, but rather an incredible and great movement made up of millions of hard-working men and women who love their country and want a better, brighter future for themselves and for their families.”

U.S. economic numbers were limited to Tuesday’s release of JOLTS Job Openings, which printed at +5.49M compared to an expectation of +5.67M. Wednesday’s release of Crude Oil Inventories, which came out at +2.4M versus the +1.3M expected, was followed by Thursday’s release of Initial Jobless Claims, which saw a 254K result versus the 267K expected number. On Friday, the United States celebrated a bank holiday, but the University of Michigan’s Preliminary Consumer Sentiment survey was released and showed a reading of 91.6 versus the 87.4 expected. 

The Eurozone economic calendar was light again last week, beginning on Monday with German Factory Orders, which showed a decline of -0.6% m/m, which was significantly lower than the increase of +0.2% that was expected. On Wednesday, the EU’s Economic Forecasts noted that, “The renewed fall in oil prices early this year and the depreciation of the euro’s exchange rate vis-à-vis the US dollar are expected to remain key determinants of both export and import  prices  in  2016.”

Overall, GBP/USD began the week at 1.2451 and concluded the week +1.2% higher to close at 1.2604, while EUR/GBP declined from 0.8877 to close the week -3.0% lower at 0.8613.

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

GBP: The economic calendar for the United Kingdom remains moderately active this coming week, starting on Tuesday with CPI, PPI Input the RPI due out at 1.1%, 1.6% and 2.3% respectively, in addition to the Inflation Report Hearings. Wednesday’s highlights then include the Average Earnings Index, the Claimant Count Change and the Unemployment Rate that are respectively expected to print at 2.3%, 1.9K and 4.9%. The week’s highlights conclude on Thursday with Retail Sales for which a 0.5% result is anticipated.

USD: The economic calendar for the United States warms up this coming week. The week’s economic highlights begin on Tuesday with Core Retail Sales, Retail Sales, the Empire State Manufacturing Index and Import Prices, which are due out at 0.5%, 0.6%, -1.5 and 0.4% respectively. Wednesday then features a talk by FOMC Member Bullard, in addition to PPI, Core PPI the Capacity Utilization Rate Industrial Production that are due out at 0.3%, 0.2%, 75.5% and 0.2%, and Crude Oil Inventories will also be released that last printed at 2.4M. A busy Thursday has Building Permits, CPI Core CPI, the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and Housing Starts that are respectively expected to come out at 1.19M, 0.4%, 0.2%, 8.1, 257K and 1.16M. Also, Fed Chair Yellen will testify. The week’s highlights end on Friday with talks by FOMC Members Bullard and George.

EUR: The Eurozone’s economic calendar warms up this coming week, starting on Monday with a talk by ECB President Draghi.  Tuesday then has German Preliminary GDP, EZ Flash GDP and the German ZEW Economic Sentiment survey due out at 0.3%, 0.3% and 7.9 respectively. Thursday offers Final EZ CPI, which is expected out at 0.4%, and the ECB’s Monetary Policy Meeting Accounts. Friday concludes the weekly highlights with talks by ECB President Draghi and German Buba President Weidmann.

Sterling Technical Forecast, Spot Rates and Major Chart Points:

GBP/USD weekly forecast: higher
Resistance: 1.2673, 1.2790/1.2864 and1.3437/80.
Spot Rate: 1.2569
Support:  1.2556, 1.2226/1.2351 and 1.2081/1.2145.

EUR/GBP weekly forecast: lower
Resistance: 0.8724, 0.8769/0.8814 and 0.8880.
Spot Rate: 0.8605
Support: 0.8562/66, 0.8414 and 0.8299/0.8343.