GBP/USD Weekly Forecast - 21 May

Saturday, May 19 2018

GBP/USD was under the cosh for another week, struggling with local data and the renewed strength of the US Dollar.

UK wages rose by 2.6%, slightly worse than 2.7% expected. In addition, the Claimant Count Change showed a jump in jobless claims, a worrying sign. In the US, the greenback resumed its gains, using upward revisions in the retail sales report to move higher. The drivers were higher yields more than anything else. Ten-year Treasury yields reached a high of 3.13% last seen in 2011.

A busy week ahead that features the inflation report, speeches by Carney, Retail Sales, and more.

Major events in the coming week:

Rightmove HPI: Sunday, 23:01.
Gertjan Vlieghe talks: Tuesday, 8:15. The external BOE MPC member will testify in front of the Treasury Committee and may provide insights about the UK economy and monetary policy.
Public Sector Net Borrowing: Tuesday, 8:30. The British government had a small surplus in March, with negative net lending. This time, a net borrowing of 7.2 billion is expected.
Inflation Report Hearings: Tuesday, 9:00. BoE Governor Mark Carney will testify in parliament, explaining the recent Quarterly Inflation Report and also answering questions from MPs.
CBI Industrial Order Expectations: Tuesday, 10:00. The Confederation of British Industry has shown stability in industrial order expectations, with a score of 4. A drop to 2 points is expected.
Inflation data: Wednesday, 8:30. UK inflation decelerated more than expected to 2.5% in March. The same level of annual inflation is projected for April. Core CPI is projected to slow from 2.3% to 2.2%. The Retail Price Index (RPI) carries expectations for a rise from 3.3% to 3.4% while PPI Input is expected to jump by 0.1% m/m after falling by 0.1% last time.
Mark Carney talks Thursday, 8:00 (opening remarks), Thursday evening (at the Society of Professional Economists’ annual dinner) and Friday (a panel about the future of central banking).
Retail Sales: Thursday, 8:30. Brits disappointed with far less shopping than expected in March: a drop of 1.2% was recorded in retail sales. This time, a bounce worth 0.8% is on the cards.
GDP (second release): Friday, 8:30. The first report of UK GDP in Q1 was a big disappointment: 0.1% q/q and 1.2% y/y, well below expectations. The second release is expected to show an upgrade to 0.2% q/q and 1.3% y/y. The Bank of England expects the economy to pick up in Q2.