GBP bulls could be stifled as the UK kicks off a week of decisive data
Tuesday’s UK jobs report provides the first of a raft of key economic data points which will provide a key basis for GBP sentiment as we move forward.
UK data set to bring focus back onto the economic recovery
The UK looks to be back in focus this week, with a raft of notable economic data points released over the course of the week. Tuesday brings the first of those releases, with the employment picture coming into sharp focus thanks to wage, unemployment and claimant count figures.
It is worthwhile noting that the claimant count figure is the leading release, covering July. Meanwhile unemployment and average earnings reflect June, prior to 19 July removal of restrictions. With that in mind, keep a close eye out for the claimant count reading. Last month saw a record 114,800 decline in claimants, yet forecasts point towards a dramatic improvement on last month’s figure to provide a fresh record low of -180,000.
With Tuesday expected to hammer home to improvements seen in the jobs market, Wednesday will be followed closely for its focus on the inflation picture. Elevated inflation has brought about a more hawkish tone from some Monetary Policy Committee (MPC) members, yet this week could bring signs that consumer price index (CPI) has topped out. Headline inflation expected to decline from 2.5% to 2.4%, while core CPI is forecast to decline from 2.3% to 2.1%.
This would mark the first signs of a reversal after a period of dramatic upside that took inflation from 0.7% to 2.5% in the space of three months.
Finally, keep an eye out for the retail sales figure on Friday, with the month-on-month figure expected to improve from 0.5% to 0.8%.
The year-on-year (YoY) figure is expected to decline, but that looks to be more of a reflection of the dramatic jump in retail sales seen this time last year.
GBP in focus as UK expected to see BoE pressure ease
Should we see an improved economic outlook and easing inflation fears come to pass, it would provide less of a reason to be long the pound.
The gains seen over the course of the past year have taken us back into a crucial area of resistance, with lows throughout the past 29-years bringing plenty of examples where the price reverses around this zone.
With that in mind, there is the basis for a potential decline over the near term.
The daily chart highlights how the price has been struggle of late, with the trendline break seen back in June bringing a decline through $1.367. That does raise the likeliness of a bearish phase coming into play before long.
Much of that sentiment looks set to be established in the week ahead, with the Bank of England (BoE) provided with a wealth of data that should inform monetary policy thinking as we go forward.
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