GBPUSD closed the previous trading week with reaching the high of January 2010. While the data keep showing inflation growth the Bank of England’s MPC prefer economic growth to curbing the inflation. The MPC members decided to leave the key interest rate at the same level of 0.5%.
However this week’s key events will probably show that the BoE won’t be able to maintain the key interest rate at such a low level.
April 12th (GMT)
08:30 GBP - CPI
12:30 USD - Tradе Balancе
April 13th (GMT)
08:30 GBP - Claimant Count Change
12:30 USD - Core Rеtail Sales
12:30 USD - Rеtail Sales
April 14th (GMT)
12:30 USD - PPI
12:30 USD - Unemplоyment Сlaims
G7 Meetings
April 15th (GMT)
12:30 USD - Cоre СPI
13:00 USD - TIC Long-Term Purchases
13:55 USD - Prelim UoM Consumer Sentiment
Last week’s fundamental data on the UK were rather “weak”, apart from Services PMI, which unexpectedly turned out to be much higher than expected (57.1 instead of 52.5). 5 min before the news release the currency pair passed 57pts as if it had known about the forthcoming surprise. Then it kept growing, reaching the daily high at 1.6297, which was 87pts more, thus passing 144pts. The next day Halifax HPI showed a 0.1% increase instead of predicted 0.2%. However GBPUSD didn’t react to the insignificant value gap. After the Manufacturing Production release (which showed a decline from 0.9% to 0.0% instead of gaining 0.6%) the currency pair lost 58pts within the first 5 minutes and 14pts more within the next 20 minutes, thus declining 72pts. On April 7th in advance of the Bank of England’s Interest Rate Decision the currency pair was moving within a 100-point range. After the release, which showed no change, GBPUSD made a 40-point momentum within the next 5 minutes. Strange as it may seem, but the US news releases didn’t have significant impact on the volatility of GBPUSD.
This week’s major news release connected with Great Britain will be released on Tuesday. This is Consumer Price Index (CPI). The forecast indicates a 4.4% increase. If to take into account the UK’s PPI data released on April 8th, which showed a 3.7% increase, we may suppose that the British economy may face stagflation: high unemployment and inflation rate, low economic growth. On Wednesday GB is to publish Claimant Count Change and Inflation Rate, which is expected to stay the same (8.0%). The unemployment data may cause a volatility surge. According to the forecast the amount of the unemployment claims is expected to decline from 10200 in March down to 3100 this month, which may support the British Pound while showing stable economic recovery in GB and hinting at a possible interest rate increase. Still, the market is getting more and more convinced that the BoE won’t raise the interest rate until August.
This week’s volatility of GBPUSD may surge if there is even the slightest hint at inflation growth, which makes the market anticipate an interest rate increase, thus influencing the GBP exchange rate. Even though this week there are only 2 major news events connected with the British economy, the volatility of GBPUSD is expected to be rather high.
As for this week’s US news releases, neither the possibility of an interest rate increase nor the environmental changes are expected to influence the US Dollar. According to the forecasts, the fundamental data are not going to see major changes in value as opposed to the previous month. On Wednesday at 12.30GMT Core Retail Sales are expected to show a 0.7 increase. If there is a value gap between the forecast and the actual data, the volatility will surge on Thursday during the PPI release and on Friday during the Core CPI release.
And finally one should definitely take into account the forthcoming G7 meetings scheduled for April 14th. The results of such meetings are usually revealed when the meetings are over. So the comments on the statements may cause significant a volatility increase.
In general over the last week the currency pair passed 316pts from 1.6111 up to 1.6427.
During the week GBPUSD will probably continue its rally approximately up to the area of 1.6400-1.6800, even though the British Pound seems vulnerable against the US Dollar. The growth has mainly been powered by the expectations of an interest rate increase. If this is really the main driver of the uptrend, GBP will most likely fall against USD in the short run.
However, 1.6500 will probably become a psychological obstacle while the closest option resistance will be located at 1.6449. The option support will be found at 1.6327.
Provided by the Department of Options,
