GBP/USD Weekly Forecast – 22 August

Sunday, Aug 21 2016

Events that marked the week:

Tuesday was marked by UK CPI and PPI figures. The Consumer Prices Index (CPI) rose by 0.6% in the year to July 2016, compared with a 0.5% rise in the year to June. Although the small increase in the rate between June 2016 and July 2016 takes it to the highest seen since November 2014, it is still relatively low in the historic context. The main contributors to the increase in the rate were rising prices for motor fuels, alcoholic beverages and accommodation services, and a smaller fall in food prices than a year ago. These upward pressures were partially offset by falls in social housing rent, and falling prices for certain games and toys.

The price of goods bought and sold by UK manufacturers, as estimated by the Producer Price Index, rose in the year to July 2016 following 2 years of falls. Factory gate prices (output prices) for goods produced by UK manufacturers rose 0.3% in the year to July 2016, compared with a fall of 0.2% in the year to June 2016. This is the first time that factory gate prices have increased on the year since June 2014. The index has been following an upward trend since August 2015. The increase of 0.3% in the year to July 2016 is therefore a continuation of the trend over the past 11 months.

Wednesday's session brought UK job figures. The number of people claiming unemployment benefit in Britain unexpectedly fell in July despite the shock decision by voters to leave the European Union, suggesting little immediate impact from Brexit on the labor market.Benefit claimants fell by 8,600 in the month, compared with an increase of 900 in June, and there was only a small fall in the number of jobs employers were trying to fill, the Office for National Statistics said on Wednesday.

Focus of the Thursday's session was on UK Retail Sales figures. In July 2016, the quantity bought (volume) of retail sales is estimated to have increased by 5.9% compared with July 2015; all sectors showed growth with the main contribution coming from non-food stores. Compared with June 2016, the quantity bought increased by 1.4%; all sectors showed growth with the main contribution again coming from non-food stores. Average store prices (including petrol stations) fell by 2.0% in July 2016 compared with July 2015. Compared with June 2016, there was a fall of 0.8%. The amount spent (value) in the retail industry increased by 3.6% compared with July 2015 and 1.6% compared with June 2016. The amount spent online increased by 16.7% compared with July 2015 and increased by 1.2% compared with June 2016.

This week markets will be looking at:

Second Estimate GDP (Friday 10:30)

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