If nothing makes you happier than surfing the waves of a classic FOREX pair then let us give you the nod on the key events giving GBP/USD a little bang for your buck this week.
While Monday 12th is light on action for this Forex pair, Tuesday more than makes up for it with some rather delicious opportunities. Take the British Consumer Price Index, for example.
Are the Brits shopping or are these guys waiting for a bus?
Widely felt to be the UK’s most important inflation data because it’s used as the central bank’s inflation target, the UK CPI monthly figures released at 9.30amGMT Tuesday regularly cause a surge in trade action. Recent data has been close to predictions and figures have been inching upwards, but recent UK news reports indicate falling import prices and that could mean the current 0.6% may be a peak.
Also at 9.30GMT Tuesday the UK Producer Price Index (PPI) and Retail Price Index (RPI) figures are released. The PPI figures have risen steeply in recent months meaning it’s costing UK producers more for their raw materials. Rising costs should lead to rising prices in the shops and ergo inflation, but the RPI indicate manufacturers are absorbing some of the costs as the data doesn’t match. That can’t go on forever so an adjustment up for inflation may be on the cards.
To cut Tuesday’s story short, the CPI may suggest deflation but the PPI and RPI may indicate inflation. With such a contradiction, it’s anyone’s guess which way the markets will take the pound. But one thing is sure – it will take a ride on this data.
Wednesday provides more engagement for traders with a GBP/USD interest. At 9.30amGMT there are 3 currency-changing events.
This time the focus is on employment and earnings – a country with good levels of employment and pay has a more robust domestic market strengthening the currency. The monthly UK Average Earnings Index report shows wages have been rising fairly steadily at around 2% compared to wages a year ago. Wednesday’s 9.30am GMT Claimant Count Change lends support to traders’ views on the likelihood of inflation change. If the number drops this is good as it indicates more people are staying in employment while a rise could affect retail sales. Forecasts suggest a rise of around 1.7K despite last month’s 8.6K% decrease. Event number three is the closely-connected Unemployment Rate. This has hovered around 5% for some months. Pundits predict no change at 4.9%.
Thursday rounds off the main GBP/USD action with the monthly Retail Sales figures at 9.30pmGMT. Leading indicators suggest there may be a drop in the rate to only 0.4% increase from last month’s far stronger 1.4%. This would add strength to the idea that inflation is slowing.
More interesting though is the raft of announcements at 12.00pm GMT about the Monetary Policy Committee Official Bank Rate at the Bank of England.
How the vote should be decided (IMO)
First up is the Members Vote, if you set up well earlier in the week and did your homework on the Bank’s members, you might predict which way the vote is going to go and even have plans on where you’re going exit your trade to make the best of the action. With one new member of the Committee (Michael Saunders replaced Martin Wheadle on 9th August) and a change in the number of votes down from monthly to 8 per year, this vote may yet offer some surprises for the markets.
The Vote is a 3 figure statement showing how members voted e.g. 0-0-9 The first number is how many voted for an increase, the second number is how many wanted to decrease the rate, the third number shows the members who wanted to leave the rate unchanged. For many months the vote has been united behind a no-change vote (0-0-9), except in July when 1 member bucked the trend and wanted a decrease (0-1-8). Expectations are for the vote to support no change again but that doesn’t mean it won’t happen.
Following shortly after 12.00GMT is the official BoE Monetary Policy Summary, which offers tidbits on the economic outlook and potential clues on the outcome of future votes. Then the Official Bank Rate is announced. This is currently 0.25% and expectations are for that to continue.
To add a little something extra to the mix ,the total value of money the BoE will create and use to purchase assets in the open market is also announced at 12.00GMT. The Asset Purchase Facility, commonly known as Quantitative Easing, basically tells us how much money the Bank is going to be printing to prop up the currency but as everyone is doing it, apparently that’s okay. It was at 375B for months but jumped to 435B in August with the aftershocks of Brexit. Could September bring another increase, a drop back or will they keep things steady?
Finally, also at 12.00GMT the Monetary Policy Committee Vote on the Asset Purchase Facility is revealed letting us know whether the decision was unanimous or not. Last month everyone thought the Committee would keep things steady with a 0-0-9 vote but in a shock move 6 members voted for an increase against 3 staying the same (6-0-3). This change of heart may keep traders wondering what will happen this time and send a few ripples through the market.