GBP/USD Daily Forecast

Thursday, Dec 14 2017

Focus of the yesterday's session was on UK job figures. There were 32.08 million people in work, 56,000 fewer than for May to July 2017 but 325,000 more than for a year earlier. There were 1.43 million unemployed people (people not in work but seeking and available to work), 26,000 fewer than for May to July 2017 and 182,000 fewer than for a year earlier. The unemployment rate (the proportion of those in work plus those unemployed, that were unemployed) was 4.3%, down from 4.8% for a year earlier and the joint lowest since 1975. Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.5% including bonuses and by 2.3% excluding bonuses, compared with a year earlier.

In the US session CPI data was published. The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.2 percent. The energy index rose 3.9 percent and accounted for about three-fourths of the all items increase. The gasoline index increased 7.3 percent, and the other energy component indexes also rose. The food index was unchanged in November, with the index for food at home declining slightly.

However, the focus of the session was on Fed's interest rate decision and the following press conference. The Federal Reserve had been expected to raise its benchmark interest rate a quarter point to a target range of 1.25 percent to 1.5 percent. Members of the Federal Open Market Committee raised its GDP estimate from 2.1 percent in September to 2.5 percent. The inflation forecast for 2018 also got a modest boost, from 1.6 percent to 1.7 percent. The statement noted that the jobs market "will remain strong," an upgrade from the assessment at the Oct. 31-Nov. 1 meeting that conditions "will strengthen somewhat further."

On top of the more buoyant outlook for overall growth, Fed officials cut their estimates for the unemployment rate, to 3.9 percent in 2018 and 2019, two-tenths below the previous numbers. The 2020 rate is expected to be 4 percent, down from 4.2 percent, while the longer-run outlook remained at 4.6 percent. The current unemployment rate is 4.1 percent. The statement noted that the jobs market "will remain strong," an upgrade from the assessment at the Oct. 31-Nov. 1 meeting that conditions "will strengthen somewhat further." Later, the committee said the current stance of monetary policy is "supporting strong labor market conditions," a contrast to the language from the previous meeting that indicated "some further strengthening."

From the UK, tomorrow, Retail Sales figures will be released. Analysts predict 0.4% incline. However, the focus will be on BoE interest rate decision though no change is expected. In the US session Retail Sales and Unemployment Claims data will be published. Retail Sales are expected to increase by 0.3%, while no change is anticipated in Unemployment Claims.

Figures to watch:

Retail Sales (Thursday 10:30)

Official Bank Rate/MPC Official Bank Rate Votes (Thursday 13:00)

Retail Sales (Thursday 14:30)

Unemployment Claims (Thursday 14:30)

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