Alex von Stachelkopf
Numerous issues, including another loan to Greece, are still being solved. The UK seems to have moved away from the eurozone’s deteriorating debt crisis. This week GBPUSD will be greatly dependant on the UK fundamentals.
Last week the British Pound slightly recovered after a downswing. However, on Thursday it hit the local high 1.5715 (failed to reach the option barrier at 1.5721) and started another downswing. This week is going to be a tough one: The 4th quarter starts with a number of major economic reports, which should be paid special attention to.
Oct 3rd (GMT)
08:30 GBP Мanufacturing PМI
14:00 USD ISМ Мanufacturing PМI
Oct 4th (GMT)
4th-7th GBP Нalifax НPI
08:30 GBP Construction PMI
14:00 USD Fed Сhairman Вernanke Тestifies
Oct 5th (GMT)
08:30 GBP Сurrent Аccount
08:30 GBP Services PМI
12:15 USD АDР Non-Farm Еmployment Сhange
14:00 USD ISM Non-Manufacturing PMI
Oct 6th (GMT)
11:00 GBP Аsset Рurchase Facility
11:00 GBP Official Bank Rate
Tentative GBP МРС Rate Statement
12:30 USD Unemployment Сlaims
Oct 7th (GMT)
08:30 GBP PPI
12:30 USD Non-Farm Employment Change
12:30 USD Unemployment Rate
As always, at the beginning of each month the USA and Great Britain start publishing their PMIs for different sectors. On Monday it is the UK and USA’s Manufacturing PMI. On Tuesday it is Construction PMI. On Wednesday it is Services PMI. The volatility of GBPUSD is always high during and right after these news releases, it is especially true of the UK’s Services PMI as it dominates the British economy. If there is a decline below 50, this will indicate a recession. Analysts expect it to decline down to 50.7 (in August it was equal to 51.1).
Halifax HPI: the exact time of the release is unknown. Halifax Bank of Scotland is the UK’s major player in the market of mortgage loans. It bases its HPI index on both the external and internal data, which makes the report fairly reliable and weighty.
Сurrent Аccount is to be released on Wednesday. In Q4 2010 and in Q1 2011 the deficit was roughly equal to 10B pounds. Now analysts expect a slight decline in the country’s deficit. The economic growth in Q2 was weak (0.2%). The revised data will probably show no changes. However, if there are any, GBPUSD will turn more volatile.
Another round of quantitative easing in the UK seems to be inevitable if to consider the MPC meeting minutes. However, the solution will be postponed till the next meeting in November. As opposed to the previous meetings, this time the Official Bank Rate is not going to be a major event. A decision to spend 50B pounds on asset purchases will become a burden for the British currency.
Even though at this point inflation is of secondary concern, the UK’s PPI report will anyway have an impact on GBPUSD. After 2 months of growth the index declined 1.9% in August, which was more than expected. In September it is said to gain 1.4%.
Even though the UK fundamentals leave much to be desired, there is high probability that the Bank of England won’t expand its QE program in the near future, which may support the British Pound.
This week may be crucial for the US dollar as well. After a slight retracement now everything seems to be in its favor. This week’s key US report is Friday’s Non-Farm Employment Change.
Last week the employment index declined down to 391K, showing that the recession was coming. Will September’s Non-Farm Employment Change show that the US economy and labor market will arrive at the right destination?
However, before this report we have some other major releases. Manufacturing PMI is expected to stay almost the same. Any decline down to the critical level of 50 will tell us about a recession. The report will include some recommendations concerning Non-Farm Payrolls.
On Oct 4th Ben Bernanke is to make a speech on “Fiscal Sustainability and Fiscal Rules” at the Annual Meeting of the Rhode Island Public Expenditure Council. As usual, his speech is expected to make GBPUSD more volatile even if he doesn’t say a word about Operation Twist.
According to the ADP, the employment in the US private sector gained 91K in August and 109K in July. This time the АDР Non-Farm Еmployment Сhange is expected to show a 76K increase. However, one should keep in mind that there is a serious gap between the ADP’s data and the nationwide data for September.
So far ISM Non-Manufacturing PMI has shown uninterrupted growth. This time it is expected to decline down to 53.1. Most part of the US economy is formed by this (non-manufacturing) sector. That is why any result, especially the employment component, will give us a hint at the overall employment situation in the country’s non-manufacturing sector (Friday’s report).
The US unemployment is still 9.1%. It is difficult to say what impact Friday’s Unemployment Rate may have on the currency market as it is released simultaneously with Non-Farm Employment Change.
The option levels 1.5474 and 1.5388 are still the levels of support while 1.5635 and 1.5721 are the closest levels of resistance.
Provided by the Department of Options,
Alex von Stachelkopf
