Alex Borzak
The British Pound has suffered greatly from the eurozone debt crisis. GBPUSD started last trading week with a slight upswing and reached the high of the week at 1.6129 on positive economic data (including Halifax HPI). Then suddenly the currency pair dropped down to 1.5868, the low of the week, thus passing 261pts down. The downswing wasn’t caused by economic data, even though the UK’s balance-of-trade deficit increased by 10B pounds. The interest rate and the QE program remained unchanged.
At the same time, the US data came out better than expected. The balance-of-trade deficit was reduced to $43.1B. The amount of unemployment claims shrunk as well. Consumers grew more confident.
Probably the most influential factor of the week was the eurozone debt crisis. On Friday mass media reported positive news on Greece and Italy, thus making GBPUSD recover almost to the level it started the trading week at. It finished the week at 1.6092.
Let’s have a look at this week’s economic calendar:
Nov 15th (GMT)
09:30 GBP CPI
Tentative GBP BOE Inflation Letter
13:30 USD Cоre Rеtail Salеs
13:30 USD PPI
13:30 USD Rеtail Sаles
Nov 16th (GMT)
09:30 GBP Clаimant Cоunt Chаnge
10:30 GBP BОE Gоv King Speaks
10:30 GBP BОE Inflаtion Repоrt
13:30 USD Core CPI
14:00 USD TIC Lоng-Term Purchаses
Nov 17th (GMT)
09:30 GBP Retail Sales
14:30 USD Building Permits
14:30 USD Unemployment Claims
15:00 USD Philly Fed Manufacturing Index
Let’s consider the UK news first:
The consumer price index (CPI), which measures the rate of inflation, reached 5.2% in October. This time the CPI is expected to decline 0.1% down to 5.1%. The retail price index (RPI), which is also a major inflation indicator, grew up to 5.6%, and will probably stay unchanged this month. Mervyn King, the BoE Governor, is now determined to write a letter to George Osborne to explain the high rate of inflation.
The unemployment claims have been growing for 7 consecutive months. This time it is also expected to reach 20.8K against 17.5k in September. Besides, the unemployment rate is growing as well. In August it reached 8.1% and is expected to reach 8.2% this time.
Once a quarter the Bank of England publishes a detailed inflation report. The report is very significant. The British Pound is very sensitive about this report and usually gets very volatile right after its publication, thus remaining volatile on major bankers’ commentaries.
The retail sales report, as opposed to some others, was a pleasant surprise in September: +0.6%. This time it is expected to go 0.3% down. Any result will cause a volatility spike.
As for the US news:
The retail sales report for September showed better-than-expected results. An increase in retail sales indicates higher consumer spending, which in its turn hints at some economic recovery.
The PPI grew by 0.8% in September, which is much better than expected. The growth was mainly caused by higher gasoline (+4.2) and food (+0.6%) prices. That may testify to inflation growth.
The TIC Lоng-Term Purchаses grew up to $57.9B in August. There was an investment inflow despite global market shocks and a cut in the US rating.
The building permits are expected to see a slight increase (+0.60M).
The situation around unemployment claims keeps improving.
The Philly Fed Manufacturing Index showed an unexpected increase last month, for the 1st time in 3 months. It also testifies to economic recovery. The index is expected to reach 9.3%, which reduces the fears of another major crisis in the US economy.
If the forecasts prove to be correct, we can expect the option level 1.5911 to become a major level of resistance. The closest major levels of support will be the option levels 1.5824 and 1.5721.
Provided by the Department of Options,
Alex Borzak
