Financial markets are trying to recover from the shock of plummeting commodity prices supported by optimistic figures of new jobs in the US.
9 May
07:00 GBP House Price Index - Halifax HPI
11 May
09:30 GBP BoE Governor King Speaks
09:30 GBP BoE Inflation Report
12:30 USD Trade Balance
12 May
08:30 GBP Manufacturing Production
12:30 USD Core Retail Sales
12:30 USD Producer Price Index - PPI
12:30 USD Retail Sales
12:30 USD Unemployment Claims
14:00 USD Fed Chairman Bernanke Testifies
13 May
12:30 USD Core Consumer Price Index - Core CPI
13:55 USD Prelim UoM Consumer Sentiment
Global Purchasing Managers Indexes released last week in Britain showed tardiness and danger to market players which, combined with tougher monetary and lending policies introduced by a few central banks of the world, will result in lower demand for commodities and, thus, slower production growth rates. In turn, this will negatively affect the pound sterling.
GBPUSD started last week at a high of 1.6737. On 3 May, half an hour before release of Purchasing Managers' Index in Manufacturing, the pair fell 87 pips and figures turned out much worse than forecasted. On 4 May, after publication of the same index in construction, the pair took 15 minutes to fall 49 pips; on 5 May it lost another 77 pips following release of the Services PMI. Failing to respond to publication of the interest rate the pair started falling before the speech of FED Chairman Bernanke reaching a low at 1.6357. Therefore, on 5 May the pair covered 186 pips from the day's high to low. The following day the pair started movement and reached the week's low at 1.6354. At release of the US employment figures at 12:30, at news breakout, the pair gapped 10 pips and later fell another 22 pips rising 93 pips within the next hour. Obviously, it did not know how to react to the unemployment rates which grew to 9.0% instead of the expected 8.8%. Starting the week at a high of 1.6737, the pair finished it at a low of 1.6354 covering 383 pips down.
Initial unemployment claims released on Thursday at 12:30 might have shown a figure much better than economists forecasted as a result of storms afflicting the south of America. This can maintain a higher number of unemployment claims for a few weeks to come.
The current week is not rich with news releases for Great Britain.
Bank of England's quarterly report published on 11 May concerns issues of monetary policies and the interest rate which usually causes volatility to spike at news breakout. Manufacturing PMI is forecasted to add 0.3%.
This week the first wave of releases of US economic figures of the start of 2011 Q2 will continue with Retail Sales data and some inflation figures. The tone in the labor market will be set by the April employment report which showed stunning figures. The trade balance deficit registered in March is forecasted to grow. Inflation data will remain under the pressure of high oil prices. PPI is forecasted to fall a little. CPI will add 0.2% according to analyst forecasts. At 13:55 on Friday Prelim UoM Consumer Sentiment is most likely to show a decrease on the previous period. This results from high gas prices and natural disasters in the US which caused large-scale destruction of property in Mid West and South because of harsh weather conditions.
On 12 May at 14:00 FED Chairman Bernanke will testify to Senate Banking Committee and Senate Committee on Housing and Municipal Government in Washington, District of Columbia, on compliance with Dodd Frank Act. First he will make a ready speech (its text is available at the FED's site) and answer questions later. As questions are not known beforehand, they can cause certain reservations which might result to volatility of an overloaded market.
The central bank is not expected to make any serious announcements this week. A number of FED politicians will make public statements but no changes in monetary and lending policies should be expected.
It should be mentioned that now the market expects figures, especially about US deficit and Chinese Yuan, resulting from bilateral negotiations within Strategic and Economic Dialogue between the United States and China held in Washington, on Monday and Tuesday.
Option support levels - 1.6327, 1.6232, closest option resistance level - 1.6449, 1.6565.
Prepared by the Options Faculty within the MF Academy
