Posts Tagged ‘Bank of England’
Foreign Exchange - UK Weekly Update - Monday, May 20, 2013 15:24 - 0 Comments
King’s parting words fall on deaf ears
Data from the Eurozone and the US last week put UK releases in the shade, as the market attempted to grapple with the underlying cause of the rise in the dollar, which has gained nearly four cents against sterling in the last couple of weeks. Whilst UK employment and earnings data was generally positive and the Bank of England inflation report revised the Committee’s economic expectations upwards, there just wasn’t enough sterling-centric news out there loud enough to distract anyone from the allure of the greenback for long.
At the start of last week some surprising US retail sales figures were released on Monday afternoon, revealing positive monthly growth of 0.1% in April, after a dip to -0.5% in March. This set the stage for USD to surge ahead against the pound by pressing below 1.53. It then paused around that area overnight, as every positive data release from the US is now greeted with speculation on when the Fed will scale back its bond-buying.
The plethora of European releases on Tuesday, Wednesday and Thursday provided a welcome sideshow to the dollar circus. Euro GDP figures were a disappointment across the board on Wednesday, with nearly all readings falling short of analyst consensus. The Eurozone GDP growth figure release typified the component releases, with the annualised figure for the bloc falling 1%. However, the overriding market sentiment of expecting to be disappointed played into the single-currency’s favour, as GBPEUR still found itself stuck between 1.175 and 1.185.
Emphasis was placed on the Bank of England’s inflation report prior to publication, given that it would be one of Sir Mervyn King’s last opportunities as governor of the BOE to impart his thoughts on the UK economy. Whereas previous reports have consistently downgraded growth expectations and revised inflation expectations upwards, this time the script was flipped and the governor took his opportunity to spread a little optimism. However, the market barely noticed – or perhaps viewed the comments through the lens of scepticism given his impending departure. That said, UK Claimant Count numbers earlier in the morning bore out the modest improvement which King alluded to during his farewell address, posting a surprise 7,300 decline and enough to edge the ILO unemployment rate down 0.1% to 7.8%.
Having seemingly bottomed out at 1.52, cable staged a comeback following the release of underwhelming US inflation and jobs data on Thursday afternoon. The return to around 1.53 was a brief one, however, as GBPUSD began to tail off again and US consumer sentiment indicators overshooting expectations by a considerable margin on Friday sent it below 1.52 once more, only for it to recover to around 1.52 this morning.
We’ve had rely on data and news from outside of the UK to determine sterling’s movements of late, but there should be enough for the market to mull over this week. The headline items – UK inflation, BOE minutes and UK retail sales – are due on Tuesday, Wednesday and Thursday, respectively. These are padded out by the Bank of Japan monetary decisions, US FOMC minutes and durable goods orders, with no tier-one European data due this week.
Have a great week.
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