Daily Economic Commentary: United Kingdom

[PipDiddy]

Bad data? Eh, that ain't a problem for the pound! Well, at least, it wasn't in yesterday's trading. Risk appetite allowed the pound to trade higher against its lower-yielding counterparts. GBP/USD finished the New York session at 1.6116 after opening the day at 1.6071.

Rumors that Spain is getting closer to asking for a bailout boosted market sentiment and encouraged investors to seek riskier assets. Heck, it seemed like traders got too excited about the news that they just shrugged off the disappointing inflation reports released by the U.K.

While the headline and core CPI figures for September came in just as expected at 2.2% and 2.1%, respectively, the PPI report printed below forecasts. The reading for the month tapped in at -0.2% and disappointed the market consensus which was for producer prices to have remained flat during the month.

Our forex calendar lists a few top-tier reports for today and I don't think that it would be too easy for traders to ignore them. So don't miss 'em later!

At 9:00 am GMT, the claimant count change report for September is eyed to show that the number of people who filed for unemployment benefits fell by 200.

Along with that, the minutes of the most recent BOE meeting will also be on tap. Back in September, the central bank left interest rates and the size of its asset purchases unchanged. Market participants will be closely looking at the report to see if the decision was unanimous or not.

Should the minutes reveal that more MPC members are pushing for more easing measures, we could see the pound trade lower. So keep tabs on it, ayt?

[PipDiddy]

Risk appetite. These were the two words that propelled GBP/USD to a fresh 9-day high yesterday. The pair, which began the day at 1.6116, had risen as high as 1.6179 before it closed the U.S. trading session at 1.6147.

There were two main factors that contributed to risk appetite. The first one was Moody’s affirmation of Spain’s Baa3 credit rating with a negative outlook, allowing the country’s bonds to remain just a notch above “junk” status.

The second was positive economic data from the U.K. The Claimant Count Change, for instance, came in significantly better than forecast as it showed that the number of people who claimed for jobless insurance fell 4,000. The consensus was only for a decrease of 200. The unemployment rate report also shared the same story. It showed that joblessness fell to 7.9% from 8.1%.

In other news, the MPC Meeting Minutes revealed that while voted on unanimously, BOE policymakers were split at their October meeting over the need for further QE after the current program expires in November. I guess we’ll just have to wait and see for ourselves what the BOE actually does in its next meeting.

Only one major report is due for today. At 8:30 am GMT, U.K.’s retail sales report will be published. It’s projected to show that sales increased 0.4%, opposite the 0.2% decrease seen the month before. Rising retail sales is usually considered bullish for the domestic currency as it suggests that consumer spending is healthy.

[PipDiddy]

Party’s over, boys! The pound broke its winning streak against its counterparts yesterday despite the release of strong retail numbers in the U.K. Cable plunged by a ridiculous 98 pips while GBP/JPY also fell by 33 pips. What gives?

The U.K.’s retail sales should’ve made the pound bulls giddy. The data showed a 0.6% gain in September, higher than the 0.1% downtick in August and analyst expectations of a 0.4% growth. Apparently, Britons got excited over clothes as clothing sales jumped by 2%.

Unfortunately, risk aversion reigned supreme during the U.S. session and erased the pound’s gains against its counterparts. Read all about what went down in the markets in my USD piece!

Only the public borrowing data is scheduled for release today at 8:30 am GMT. The data is expected to be weaker than its previous 12.4 billion GBP reading, so watch your charts closely for major inflection points that you can trade!

[PipDiddy]

For the second straight day, the British pound was weighed down heavily by risk aversion. Against the safe haven U.S. dollar, the pound marked a 33-pip loss. Meanwhile, versus the low-yielding Japanese yen, the pound fell 23 pips.

The blow to risk sentiment came from the absence of concrete action with regards to a Spanish bailout in the EU summit. The only notable outcome of the EU summit was the agreement that the ECB would eventually be the chief banking supervisor in Europe. There was also the news that Germany once again showed opposition to using the ESM to directly re-capitalize banks in Europe.

In other news, the Public Sector Net Borrowing report beat forecast and came in with only a 10.7 billion deficit. The market had initially expected an 11.9 billion GBP deficit.

The upcoming week will be a heavy one as two major events are scheduled to happen.

On Wednesday, BOE Governor Mervyn King will be speaking at the Chamber of Commerce. With the BOE’s asset purchase program scheduled to end in November, traders will be closely monitoring what King has to say with regards to future monetary policy.

On Thursday, the U.K.’s preliminary GDP reading will be published. It’s expected to show that the country expanded 0.6% in the third quarter of this year, opposite the 0.4% contraction (revised up from-0.7%) seen during the second quarter. A rising GDP is usually considered bullish for the domestic currency, as it means that the economy is healthy.

[PipDiddy]

The pound’s price action was as mixed as a hotpot yesterday as the currency warriors traded on risk sentiment. Though Cable steadied at 1.6010, Guppy had shot up by more than 100 pips to 127.97. Meanwhile, EUR/GBP inched 24 pips higher at .8156. Talk about sending mixed signals!

The U.K. didn’t release any major data yesterday, so the pound bulls and bears paid attention to the improvement in risk appetite in the euro region. Apparently, traders are optimistic that the bailout odds will be in Spain’s favor after the regional elections last weekend.

The pound gained against the yen, thanks to a not-so-surprisingly weak trade deficit numbers from the Land of the Rising Sun.

Today at 8:30 am GMT the BBA mortgage approvals data will take center stage. The report is expected to improve from its numbers last month, but keep your eyes peeled for any surprises.

At 5:00 pm GMT BOE head honcho Mervyn King will also be under the spotlight as he delivers a speech. Watch this event closely for any signs of more QE down the road, aight?

[PipDiddy]

Tough day at work for the pound! GBP/USD ended the day in the red as it closed at 1.5951, 58 pips down from its 1.6009 open price, while GBP/JPY dipped 5 pips below the 127.00 handle before closing at 127.33. Will today be any better for the pound?

The U.K. didn't release any economic reports yesterday, leaving risk sentiment as the primary driver of price action for the pound pairs. Unfortunately for GBP/USD and GBP/JPY, risk was off yesterday as U.S. equities slid down with the S&P 500 index slipping by 1.4%.

Up ahead, only the CBI industrial orders report is set for release from the U.K. at 11:00 am GMT. The figure for October is slated to climb from -8 to -6, which would still reflect decreasing order volumes but at a slower pace. Bear in mind that a weaker than expected reading could trigger another pound selloff so y'all better stay on your toes during the actual release!

[PipDiddy]

Not so fast, pound bears! The pound erased some of its intraweek losses against its counterparts yesterday when expectations strong U.K. data boosted motivated the currency bulls. Cable popped up by 80 pips while EUR/GBP plummeted by 82 pips. Booyah!

The CBI industrial orders expectations gave little encouragement for the pound bulls yesterday when it came in at -23, a 10-month low, when analysts were only expecting a reading of -6. Apparently, business owners were concerned about the country’s manufacturing activity as well as the political and economic conditions abroad.

Good thing that investors had their eyes on the GDP report scheduled today at 8:30 am GMT! With retail sales and trade numbers showing improvements lately, market geeks are expecting the U.K. to climb out of the recession today by showing positive growth for the first time in three quarters.

The services index is also due for release around the same time as the GDP report, but I have a feeling that market movers won’t pay attention to that. So get your trading plans ready and focus on the U.K. GDP report, kids!

[PipDiddy]

Bravo, old chap! The pound was the king of the currency hill yesterday, as it soared up the charts! GBP/USD rose 101 pips to finish at 1.6131, while GBP/JPY finished a ridiculous 159 pips higher at 129.56.

Now that’s how you end a recession with a bang! For the first time in a year, the U.K. economy posted positive GDP growth, as it grew an impressive 1.0% during the third quarter. Not only did it end the losing streak, but it also came in much better than the anticipated 0.6% increase.

Apparently, the Olympics, a slew of holidays, and a major improvement in the services sector all played a key role in lifting up the U.K. economy. The only question is, can the economy continue this performance in the fourth quarter?

No data lined up from our economic calendar today, so chances are we’ll see risk sentiment drive the markets today. Good luck trading today fellas!

[PipDiddy]

Talk about letting a rally fizzle! The pound was unable to extend its gains for a third straight day as it ended the week on a low note. After trading below its opening price for almost the entire day, Cable settled 38 pips lower at 1.6093.

Looks like traders finally got their fill pounds because by Friday, demand for the pound had died down! It's possible that many had taken profit on their positions, considering that the pound had gained so many pips in the previous two days.

Today, we only have the net lending to individuals report on tap, and it's said that it will print a 0.6 billion GBP increase to undo August's 0.4% decline. Though this report isn't historically known as a major market mover, it could provide us with valuable insight on the state of the U.K. credit market.

Later in the week, the manufacturing PMI will be available. Forecasts say that the manufacturing industry probably contracted once again. The index is expected to slide from 48.4 to 48.1 and will be available on Thursday.

To cap off our week, we'll take a look at the construction PMI, which is slated to tick down from a reading of 49.5 to 49.1. Catch the report when it comes out on Friday.

[PipDiddy]

That is NOT how you wanna start off the week! The pound continued its misery from Friday, as it dropped another 81 pips versus the dollar, leaving GBP/USD to finish the day at 1.6033. Will the pound’s troubles continue or will we see a small pullback today?

In terms of actual data, the U.K. actually received better-than-expected news as the net lending to individuals report showed that British banks actually lent out 1.7 billion GBP last September. Not only was this nearly triple the expected increase of 600 million GBP, but it also marked the highest level in 4 years. This means that there’s more liquidity that’s hitting bottom-line consumers, which should translate to more spending and investing.

However, the pound still took a hit thanks to uber-cautious comments by BOE Deputy Governor Bean (no, not that Mr. Bean!). According to Bean, while there are reasons to remain optimistic, the economy is still in a bumpy ride and there’s a good chance that Q4 GDP growth will disappoint. His dovishness on the economy weighed down on the pound, causing the bears to take over.

For today, we’ve got the CBI realized sales report clocking in at 11:00 am GMT. The index is projected to print a reading of 7, marking a slight improvement from last month’s score of 6. If it comes in much higher than that, it could give the bulls enough fuel to make a comeback today.