This week is pretty huge on the data and announcement front- with plenty going on in the market since the strong NFP data on Friday which supported the Dollar against the Euro and Sterling into the close.
The main takeaway from Fridays jobs data is that the labour market is still tight in the U.S, and there is no real reason for any major policy shift from the Fed just yet, clearly the economy is sustaining the higher interest rate model and until there is a sign that this is changing then I do not believe you see any change in language from Jerome Powell. For now this potentially means the Cable upswing is finished unless we see some real strong bull case scenarios for the Pound.
Onto this week, the real data releases begin on Tuesday with UK employment coming out coupled with unemployment rate data – the expectation is that the UK job market is softening, we are also expecting to see average earnings lower in the UK down by around 0.2%- this release could weaken the Pound slightly. Later we have U.S core inflation data where we are expecting the inflation rate to stay at 4%, however, any number lower than this will inject more strength into the Dollar as it means the Fed is closer to hitting its target of 2%.
On Wednesday we kick off the day with UK GDP numbers, expected to come in at 0.1% for the 3 month average and 0.6% year on year, GDP has been an issue in the UK, though we haven’t seen a dip into recession, growth in the UK is definitely stagnating and I feel the data will show this as we have had a few months of bad spending figures in the UK. We also have industrial and manufacturing production data out with trade balance for the UK, all expected a lot lower than previous so again Wednesday morning could be weak for the Pound if all data comes out as expected. Later on Wednesday, we have U.S PPI data and the Fed interest rate decision (My expectations I mentioned earlier)- I do not expect this to be a market-moving meeting- the press conference may add some volatility however I expect the Fed’s “Higher for longer” stance to remain the same.
On Thursday the main events are the BoE and ECB interest rate decisions- similar to the Fed, I am not expecting much difference in announcement, rates will remain the same and messaging should still be unchanged with rates not expected to be cut just yet- so unless we hear something different in the press conferences, these shouldn’t be volatile events.
On Friday we have flash PMI’s for the UK, Europe and U.S, where majority of releases are expected under 50 for Europe, some over 50 (Services) for the UK, and same for the U.S- This alongside quad witching on Friday could mean a very volatile day, especially into the close.
