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Economic calendar: Will GBP hold its uptrend?

Summary:

  • UK’s jobs report could call into question yesterday’s bounce seen in the GBP
  • US PPI will be a precursor before tomorrow’s CPI
  • DoE could take us by surprise a second week in a row

The British pound was decisively the best performing currency yesterday as it got much higher than expected inflation. Although, the higher inflation is, the stronger case for a hike would be, things do not look so simply in case of the UK’s economy. Beside the UK’s jobs report, there will be a US PPI reading which might be a good prognosis ahead of CPI which is scheduled for tomorrow.

9:30 am BST - UK’s jobs report: On the face of it, yesterday’s sturdy inflation numbers we got from the UK might prompt the BoE to change its mind with regard to interest rates increases. However, as usual the devil is in the details. The UK experienced the slowest growth amid its G7 peers in the second quarter mainly due to lackluster consumption. In turn, a major reason for that scenario could have been negative real wage growth which by far weighed on consumer spending. Even as today’s wage data is likely to show a lower number compared to inflation (2.9% yoy), the reading above forecasts might appease concerns pertaining to sluggish consumption going forward which might be GBP-conducive after all. The jobless rate is slated to stay at 4.4% whereas average earnings should come in at 2.3% and earnings excluding bonuses could bring a bump to 2.2% in July from a 2.1% seen previously.

1:30 pm BST - US PPI: Admittedly, PPI is not on the radar in the eyes of investors, it might be treated as a good omen ahead of CPI which would have a massive impact on investments. The figure for August is going to show 2.5% yoy and 0.3% mom respectively. If so, it would be decent figures, much more solid in comparison to July’s ones. The US10Y yield is in a tiny retreat losing 1 bps, however even as it has recoup its last week losses of late, the US dollar has broadly remained on the back foot being traded not a long way off from 1.20 against the single currency. To sump up, higher PPI would reignite market’s expectations in terms of a third rate hike this year.

3:30 pm BST - Crude oil stocks by DoE: The US DoE is scheduled to release its weekly metrics regarding the oil market. The last week saw a hefty slump of oil output caused by stoppages in US refineries based in Texas which had been afflicted by the hurricane Harvey. Simultaneously, crude oil stocks increased while gasoline inventories declined. In turn, the API report (published yesterday evening) suggested that the same scenario could repeat this week once again (it showed a rise in stocks by 6.2mb). Having said that, Harvey-fueled ramifications in conjunction with first disruptions sparked by the hurricane Irma might be seen in today’s report, so traders could be confused again. Under such circumstances cautiousness is especially warranted.

link do file download linkWTI prices have clearly bounced off a support being placed at around $47. In addition, they have been propped up by quite the reassuring OPEC report. $50 could be a major resistance to watch. Source: xStation5

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