GBP/USD Weekly Forecast - 11 June

Saturday, Jun 09 2018

GBP/USD had an OK week, gradually climbing up from the lows. UK data was upbeat with both the construction and services PMI’s coming out above expectations. Other data were also positive. However, the UK’s ideas around the Irish border were swiftly rejected by the EU and this weighed on the pair.

In the US, data was good with the ISM Non-Manufacturing PMI coming out above projections. The growing tensions between the US and its allies on trade weighed towards the end of the week.

What’s next? Inflation, jobs and retail sales will all shake the pound, as well as a vote in Parliament on the Brexit withdrawal bill.

Major events in the coming week:

Manufacturing Production: Monday, 8:30. Output in the manufacturing sector disappointed in March with a drop of 0.1%, the second consecutive fall. April is expected to see a bounce with +0.3%. The wider industrial output is projected to show an increase of 0.1%.
Goods Trade Balance: Monday, 8:30. The UK has a long-term trade deficit. It ballooned to 12.3 billion in March and is now expected to squeeze to 11.5 billion in the report for April.
Construction Output: Monday, 8:30. This volatile measure showed a fall of 2.3% in construction back in March and a spring bounce is on the cards for April: 2.4%.
Vote in Parliament: Tuesday. The House of Commons will convene to hold a marathon session on the government’s Brexit withdrawal bill. The House of Lords approved 15 amendments to the government’s proposal, dealing a blow to the not-so-stable government. There is a chance that a few members of Theresa May’s Conservatives may rebel. A win for May will help the pound.
Jobs report Tuesday, 8:30. The previous jobs report was a disappointment due to a jump in the number of jobless claims: the Claimant Count Change rose by 31.2K in April. An increase of 11.2K is on the cards now. Average Hourly Earnings stood at 2.6% in March, and expected to drop to 2.5%. The unemployment rate stood at 4.2% in March and is expected to remain unchanged.
Inflation data: Wednesday, 8:30. The Bank of England may raise rates in August, but only if inflation rises. After slowing down to 2.4% in April, headline CPI is projected to repeat the same rate in May. Expectations: Core CPI is at 2.1% while PPI Input is predicted to jump by 1.8%.
RICS House Price Balance: Wednesday, 23:01. the balance between increases and decreases in house prices turned negative in April, falling to -8%. An improvement is expected now: -5%.
Retail Sales: Thursday, 8:30. After the winter came to an end, retail sales jumped by no less than 1.6% in April, helping Sterling. Another increase is expected now: 0.5% in the month of May.