Daily Economic Commentary: United Kingdom - Page 63
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  1. #621
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    Default December 1, 2011

    And that makes it three for three! Yesterday's risk rally helped the British record its third consecutive win against the dollar as the coordinated action of central banks spurred risk taking. As a result, GBP/USD rallied to as high as 1.5780 before settling at 1.5692 for an 82-pip gain on the day.

    As I had mentioned yesterday, we only had the GfK consumer confidence report to work with as far as U.K. data was concerned. Unfortunately, it didn't really bear any good news! Though the index rose slightly from -32 to -31, the downtrend in consumer confidence remains intact.

    Compared to last year, it seems our homies up in the U.K. feel much, much worse about their current personal financial situation and are more pessimistic about the economy as a whole. The only silver lining in this dark cloud is that more British consumers believe that now is a good time for a major purchase. Just in time for the holidays!

    Today, we'll deal with the U.K. manufacturing PMI which is slated to slide from 47.4 to 47.1. Catch it at 9:30 am GMT.

    An hour after that, we'll take a look at the BOE Financial Stability Report. Considering that central bank officials have been speaking quite dovishly lately, if this report surprisingly gives positive feedback on the economy, it could spark increased demand for the pound.
    "The only cable I watch is the pound baby."

  2. #622
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    Default December 2, 2011

    It was an up and down day for Lady Cable, which couldn’t sustain its winning run yesterday. GBP/USD basically stayed within range, and eventually ended the day at 1.5685, just 7 pips lower than its opening price.

    One of the reasons why the pound may have been unable to post new highs is probably because of the manufacturing PMI, which indicated that manufacturing activity is slowing down. While the report printed better-than-expected at 47.6, it was also the index’s lowest reading in over two years. This highlight the weakness in the British economy, as the U.K. is suffering from poor demand from the U.S. and the euro zone.

    In other news, BOE head honcho Mervyn King delivered a speech regarding the state of the British banks. While King did say that U.K. banks are better off than their European counterparts, he did say that not everything is fine and dandy. For one, U.K. banks’ exposure to Irish, Italian, and Spanish debt amounts to nearly 160 billion GBP, and there’s no telling when this will finally come to haunt them.

    For today, the only red flag we have coming up is the construction PMI, which is scheduled to be released at 9:30 am GMT. Word is that the index will print at 52.1, which would be slightly lower than the previous month’s reading of 53.9. If this comes in worse than expected, it could cause the pound to take a small hit, so make sure you pay attention when this report is released.
    "The only cable I watch is the pound baby."

  3. #623
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    Default December 6, 2011

    It was a day of consolidation for the pound, as it basically stayed within its average true range versus the dollar and the yen. GBP/USD basically traded between the 1.5600 and 1.5700 handles before closing at 1.5647, up just 14 pips on the day. Meanwhile, GBP/JPY failed to make any new significant highs or lows and finish at 121.58, marking a 31-pip loss.

    The pound benefited from the release of the services PMI report, which printed at 52.1 Not only was this higher than the expected (50.6), but it was also an improvement from the previous month’s release of 51.3.

    Digging deeper though, the numbers aren’t as nice as you would think. The new orders, future activity, and employment components were all disappointing, and it appears that we’ll continue to see sluggish performances in 2012.

    For today, we’ve got housing data on deck in the form of the Halifax housing price index, due at 8:00 am GMT. Housing prices grew by 1.2% in October, which was a nice reversal from the previous trend of declining home prices. If we see a substantial increase in today’s report, it could give the pound a nice boost and allow it to set off for new highs.
    "The only cable I watch is the pound baby."

  4. #624
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    Default December 7, 2011

    Aaah, there’s nothing like bad data to wake currency bears out of hibernation. Just ask the pound! Yesterday GBP/JPY was down 39 pips by the end of the New York session, while GBP/USD ended the day 51 pips below its opening price at 1.5596.

    It was reported yesterday that consumer spending in the U.K. declined further in November. According to the BRC retail sales monitor report, same-store sales dropped by 1.6% during the month following the more modest 0.6% contraction we saw in October.

    To make matters even worse for the pound, the most recent Halifax HPI showed that house prices went back to negative territory once again after printing a 1.2% uptick in October. The report showed that the price of an average home in the U.K. dropped by 0.9% in November. This must have upset pound bulls as the report is considered as a leading indicator of the housing market’s health.

    With that said, be sure to be on your toes for the reports from the U.K. listed on our forex calendar today as they could determine the pound’s fate in the charts. At 9:30 am GMT, the manufacturing production report for October will be released and it is anticipated to come in at -0.1%. Along with that will be the industrial production report for the same month which is eyed at -0.3%. Then at 3:00 pm GMT, NIESR will release its GDP estimate for September to October. Watch out for a figure higher than its previous reading of 0.5% as it would probably be bullish for the pound.

    There you have it boys and girls. Make sure you ain’t snoozin’ when the numbers are released later, ayt?
    Last edited by PipDiddy; 12-06-2011 at 10:26 PM.
    "The only cable I watch is the pound baby."

  5. #625
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    Default December 8, 2011

    It looks like Forex Gump was correct in saying the pound has become the “European safe haven” currency. Even though risk appetite faded in the financial market, the pound was able to post spectacular gains against both the dollar and the euro. GBP/USD ended the day with a 109-pip gain while EUR/GBP closed 57 pips lower.

    On the economic front, the manufacturing production report showed a 0.7% decline, worse than both the 0.1% decrease initially predicted and last month’s 0.1% gain. The industrial production report also shared the same story as it showed a 0.7% fall versus the 0.3% decline forecast.

    Today, all eyes will be on the pound as the Bank of England (BOE) announces its decision on interest rates. The market widely expects the BOE to keep rates unchanged at 0.50% so pay attention instead to the central bank’s tone on the accompanying statement. If the BOE updates the market that their quantitative easing program is working, we could see the pound skyrocket across the board again.
    "The only cable I watch is the pound baby."

  6. #626
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    Default December 9, 2011

    The pound sank down the charts yesterday, as risk aversion weighed heavily on the markets. After consolidating for the better part of the day, GBP/USD dropped midway through the New York session and finished at 1.5635, down 71 pips on the day. Meanwhile, GBP/JPY finished at 121.49, marking a 47-pip loss.

    Interestingly, the pound was largely unaffected by Bank of England interest rate decision, which resulted in no changes to its base line rate or its asset purchase program.

    Instead, it was comments regarding bond purchasing by ECB President Mario Draghi that sucked the air out of the markets, allowing safe havens like the dollar and yen to rally. Make sure you check out my euro zone commentary for the juicy details on this development!

    For today, we’ve got a couple reports on tap in the form of the producer price index and trade balance figures, both of which are scheduled for release at 9:30 am GMT. Producer prices are expected to have risen by 0.3% last month, which would be a complete reversal from the 0.8% decline the month before. Meanwhile, a trade deficit of 9.5 billion GBP is expected to be posted for the month of October.

    Now, I’m not too sure if we’ll see a strong market reaction from these two reports, as economic reports seem to have had little effect on price action this past week. Nevertheless, it would be prudent to stay on your toes and be ready for anything!
    "The only cable I watch is the pound baby."

  7. #627
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    Default December 12, 2011

    While the European Summit was able to support risk appetite slightly, GBP/USD still failed to make any significant gain or loss and closed the day barely changed from its opening price last Friday. GBP/USD sat at the 1.5663 by the end of the U.S. trading session, just 28 pips higher from its opening price that day.

    After 10 hours of talks, the European leaders managed to agree on a new fiscal pact last Friday. While it was a step in the right direction, it did not include all 27 European nations and only the 17 member nations that use the euro were involved. In addition, the ESM, the long-term bailout fund that would replace the EFSF, would be capped at the 500 billion EUR and would NOT be treated like a bank. This means that it can't borrow from the ECB.

    Economic data that came out were mixed. On the one hand, the Producer Price Index Input was only at 0.1%, slightly worse than forecast. The Trade Balance, on the other hand, showed a 7.6 billion GBP deficit, which was much better than the 9.5 billion GBP deficit initially expected.

    This week, there are several important news releases that we need to watch out for. Today, the Bank of England Governor is scheduled to speak. As the head of the governing body that controls interest rates, his words will be closely listened to as he may drop hints on future monetary policy.

    On Tuesday, the country's Consumer Price Index will be published. The market expects inflation to edge lower to 4.8% from 5.0%.

    Then, on Wednesday, some labor figures will be released. The Claimant Count Change is slated to report that the number of unemployed people was reduced by 17,300. Meanwhile, Average Hourly Earnings are predicted to have risen by 2.0%.

    Last is the Retail Sales report on Thursday. The report is generally a market mover, so don't miss it! The consensus is a 0.2% decline.
    Last edited by PipDiddy; 12-11-2011 at 09:45 PM.
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    "The only cable I watch is the pound baby."

  8. #628
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    Default December 13, 2011

    Look out below! No thanks to risk aversion in the markets and lack of economic data from the U.K., the pound suffered losses against its major counterparts. GBP/USD ended up closing 60 pips below its open price after dipping to an intraday low of 1.5537.

    As I mentioned in my euro writeup, renewed concerns on the euro region’s debt crisis fired up the currency bears yesterday, especially after credit rating agencies Moody’s and Fitch followed the S&P’s lead and warned of more fiscal trouble ahead for the region.

    Of course, it also didn’t help that research from the Bank of International Settlements (BIS) suggested that additional quantitative easing (QE) from the BoE won’t be as effective as it was in its earlier days.

    You see, the BIS believes that more stimulus from the central bank won’t cut government debt as much as analysts originally estimated. Apparently, the program is subject to diminishing returns if you compare the size of the next asset purchases to the size of the overall government debt.

    Let’s hope the economic data scheduled today will give the pound bulls reasons to attack! Earlier today we saw the RICS house price balance clock in only a 17% decline in house prices in November, a bit better than the expected 25% decline.

    Hang on to your seats, folks, because at 9:30 am GMT today we’ll see the U.K.’s CPI figures, together with the retail price index. The CPI is expected to print below 5.0% in November, but a higher figure might suggest that the BoE’s prediction of softer inflation might take longer than the central bank expected.
    Last edited by PipDiddy; 12-12-2011 at 09:13 PM.
    "The only cable I watch is the pound baby."

  9. #629
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    Default December 14, 2011

    For the second straight day this week, Cable found itself suffering at the hands of the bears. It was sold-off like ice cream on a hot summer afternoon, ending the U.S. trading session 112 pips lower from its opening price that day.

    Cable’s move down was driven by external factors, rather than things happening in the U.K. Due to the lack of quantitative easing talk in the U.S. Federal Reserve statement yesterday, risk aversion took hold of the markets again. This boosted safe haven currencies like the dollar and drove “risky” European currencies like the pound lower across the board.

    Data that came out of U.K. were mostly in line with expectations. The monthly consumer price index showed a 4.8%, just as expected. The core version of the report stood at 3.2%, just slightly lower than the 3.3% forecast.

    Today, we’ll be treated to some labor data at 9:30 am GMT; namely the Claimant Count Change, the Average Hourly Earnings, and the unemployment rate. The Claimant Count Change is slated to print a 16,100 increase in the number of people claiming jobless benefits. Meanwhile, Average Hourly Earnings is predicted to show a 2.0%. The unemployment rate is expected to have risen to 8.4% from 8.3%.
    "The only cable I watch is the pound baby."

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    Default December 15, 2011

    Thank goodness for good economic data! Despite the selloff in high-yielding currencies yesterday, the pound was able to come out relatively unscathed against its major counterparts. Cable ended the day with a 10-pip loss after dropping to an intraday low of 1.5409, but EUR/GBP also ended up falling by 26 pips to .8396.

    As I said in my EUR writeup, escalating concerns on the euro zone debt drama fueled risk aversion in the markets yesterday. Good thing the U.K. printed better-than-expected economic reports!

    The jobless claims data released yesterday revealed that there was an additional 3,000 claimants in November, a bit higher than the downwardly revised 2,500 claimants in October but still a lot lower than the expected 5,300 figure.

    In addition, the claimant count rate clocked in at 5.0% for the month, lower than the 5.1% growth rate than analysts were expecting. Lastly, the country’s unemployment rate measured by a three-month rolling average ending in October stagnated at 8.3%, still at its highest levels since 1996.

    Will the U.K.’s economic data scheduled today be enough to shield the pound from any more losses? At 9:30 am GMT we’ll get hold of the country’s retail sales report as well as their consumer inflation expectations, followed by the CBI industrial order expectations at 11:00 am GMT.

    Of course, you need to keep your eyes peeled for any news that might affect risk sentiment! Word on the hood is that the currency bears are just getting started to end the year with a bang, so make sure you keep a close eye on your pound trades!
    Last edited by PipDiddy; 12-14-2011 at 09:41 PM.
    "The only cable I watch is the pound baby."

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