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UK economic news report week beginning 19/05/14

Fundamental Analysis - Econ Alerts

The week commencing Monday, 19th May 2014 could give traders greater insight on the supposed recovery of the UK economy, there are three news reports that investors who trade GBP currency pairs should be watching:

  1. The Inflation Report or CPI for April and the core rate inflation – this will be released on Tuesday at 9:30 am GMT.
  2. The Bank of England will be releasing their minutes from the monetary policy committee meeting – this will be released on Wednesday at 9:30 am GMT.
  3. The UK GDP report – released on Thursday at 9:30 am GMT.

Out of all of the reports, the core rate inflation report will the main one to take note. If we see a better than expected Inflation report of 1.8% or over, accompanied along with hawkish sentiments within the Monetary Policy Committee meeting minutes, I believe we could see the GBP being bullish.

GBP/USD - Econ Alerts
Daily timeframe

The GBP/USD has been trending upwards for almost a year as shown by the chart below and is continuing to do so spurned on by the potential recovery of the UK economy. In recent weeks the GBP/USD has been trending downwards after failing to break the 1.70 level and a five-year high. This could have been a start of a trend reversal or perhaps just a retracement.

 

 

GBP/USD - Econ Alerts
Weekly timeframe

If we look at the weekly chart for theGBP/USD we can see price had broken a previous high of about 1.6765 then went on to test the 1.70 level, before pulling back to the previous resistance level which now seems to be acting as support. If the reports this week prove to be better than expected then I would expect the sterling to be bullish and would assume the 1.70 level could be broken in the near future.

 

 

GBP/USD - Econ Alerts
Monthly timeframe

The GDP report figure perhaps wouldn’t show any surprises due to information on the GDP being readily available far in advance before the figure is released, but the market will still move on its release confirming what was already expected.

There could be possible resistance experienced at the 1.70 level if the price does actually reach this level, as was the case previously but the fundamentals for theSterling are looking very positive and there are technical indicators that are showing bullish signals. The release of the BoE minutes may not be as hawkish as some investors would like which could reduce the momentum of the upward drive, for the 5-year high to be broken we may have to wait until there is a clearer indication that the Bank of England will be raising interest rates. Providing the UK continues toshow signs of recovery with the release of positive data the interest rates could be raised in the near future, inflation is near the Bankof England’s target of 2% so sooner or later Mark Carney may act. A possible hindrance to the recovery to UK economy is the housing market, which has been highlighted by Mark Carney recently. The lack of new homes means the average price of UK homes which has been driven up by demand has risen about 9% in about a year.

Some other important events in the newswill be the Bank of Japan’s interest rate decision and the press conference followed by the Governor of the Bank of Japan Mr Kuroda, to be held on Wednesday. There could be some slightly buoyant tones in the statement after the much higher than expected first quarter GDP report, the USD/JPY has been in a sideways range for a few months and I believe this could go on for a while longer. If we were to trade the USD/JPY we should be using range trading strategies, theprice is currently near the bottom of the range and we could be seeing to the USD/JPY moving long after bouncing off support.

Also on Wednesday the US Federal Reserve will be releasing their minutes from the FOMC meeting, the US has recently had some positive data released in the form of housing starts but the markets haven’t reacted very positively towardsthese positive reports. There will be speeches about the economy and the monetary policy coming from Esther George, Narayana Kocherlakota and the Chair Janet Yellen.

Canada will also be releasing their Inflation and core Inflation rate report for April on Friday this week. Towards the end of the week trading the markets usually becomes riskier as there are much fewer partakers

 

 

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