Daily Economic Commentary: United Kingdom

[PipDiddy]

The pound may have had its way with the dollar, but it could only salvage a draw against the yen. After a full day of trading, GBP/USD ended 45 pips higher at 1.6077 while GBP/JPY finished virtually unchanged at 127.99.

Although the CBI realized sales report revealed a huge upside surprise, market players weren't really moved by its results and price action on pound pairs were hardly affected. The index printed a reading of 30, which is over 4 times the expected reading. Not only did October's stats far exceed expectations, but it also marks the fastest rate of growth since June. The best part is that retailers believe they'll see the same kind of robust growth next month!

Now on to more somber news - the GfK consumer confidence report. The index, which was published just a few hours ago, printed a reading of -30, which is slightly lower than the -28 reading that many were expecting to see. This comes as terrible news considering the U.K. just crawled out of recession. It makes me wonder if the U.K. can maintain its current rate of growth with consumer confidence on the way down.

No more reports from the U.K. today. In the meantime, I suggest y'all keep tabs on risk sentiment!

[PipDiddy]

For the second straight day yesterday, Cable was able to trade positively. The pair, which opened the day at 1.6077, consolidated for the most part of the Asian session and then surged higher during the European and U.S. trading session.

There wasn’t much in terms of data yesterday as only the Gfk Consumer Confidence survey for October was released. It published a reading of -30, which was slightly higher than both forecast and the previous period’s reading. It was also at its lowest reading in 6 months.

According to the details of the survey, while the Olympics was able to boost the country’s growth rate, people still became more worried about their financial situation over the next 12 months.

Today, two major reports will come out that could have a strong effect on Cable’s price action.

The first one, which will be published at 7:00 am GMT, is the Nationwide House Price Index. It’s projected to show that the selling price of new homes with mortgages back by Nationwide rose by 0.2%, opposite the 0.4% decline seen the month before. Rising house prices are normally seen as bullish for the domestic currency as it could attract investors in the housing sector.

The second report you should keep an eye out for is the Manufacturing PMI. It’s going to come out at 9:30 am GMT and it is expected to print a reading of 48.1. Last month, the reading was at 48.4. A reading below 50.0 means indicates that the manufacturing industry is contracting.

[PipDiddy]

What a letdown! It looked as though GBP/USD was going to finish the day above 1.6150, but sellers dragged the pair back down in the New York session, forcing it to close at 1.6124, down 14 pips on the day.

The contraction in the U.K.'s manufacturing industry worsened last month, as evidenced by the decline in the manufacturing PMI. The index dropped sharply from 48.1 to 47.5, strengthening pressure on the BOE to whip out more QE to support the economy.

Today, we have the construction PMI on tap, and survey says that it could be just as disappointing. Experts believe that the index could slide from 49.5 to 49.1. If the report fails to meet forecasts, it could lead to another pound sell-off as traders price in the possibility of more stimulus from the BOE's meeting next week.

[PipDiddy]

Talk about a bloodbath! The pound took a beating on Friday, as risk aversion swept through the markets during the New York session. GBP/USD dropped 106 pips to finish at 1.6018, while GBP/JPY closed 42 pips lower at 128.83.

We actually saw a better-than-expected result from the construction PMI, which rose from 49.5 to 50.9. It was projected to come in at just 49.1.

The problem though, was that we saw a strong sell-off after the release of the U.S. NFP report, allowing the scrilla to emerge victorious. Make sure y’all hit up my U.S. commentary for the 411 on the payrolls report!

For today, we’ve got the services PMI on tap at 9:30 am GMT. Expectations are that the report will print at 52.0, which would be a slight drop from last month’s reading of 52.2. If the reading comes in higher than anticipated, it could give the pound a nice boost to bounce back from Friday’s losses.

[PipDiddy]

Look out below! The pound fell like a rock in yesterday's trading following the release of worse-than-expected data from the U.K. GBP/USD fell from its intraday high of 1.6040 and hit a bottom at 1.5957 before closing the day 39 pips below its opening price at 1.5972.

The U.K. services PMI report for October printed lower at 50.6 than the 52.0 consensus and September's 52.2 reading. Of course, the reading didn't bode well for the pound as it indicates that conditions in the sector, which makes up over 70% of the British economy, aren't looking good.

On top of that, the BRC retail sales monitor showed that consumer spending contracted by 0.1% in October after posting a 1.5% uptick the month prior.

Today the manufacturing production report for October will be on tap and chances are, it would probably affect the pound's price action. Due at 9:30 am GMT, the report is expected to show that manufacturing activity picked up during the month with the consensus at 0.3%.

A better-than-expected figure could send the pound higher but a disappointing one could fuel its sell-off even more. Watch out for it, ayt?

[PipDiddy]

With the markets focusing their attentions on the U.S. elections, we didn’t see much movement on GBP/USD yesterday. The pair traded within its average daily range and finished at 1.5994, just 22 pips above its opening price.

Even worse-than-expected manufacturing production data couldn’t give the bears enough mojo to send the pound to new lows. Manufacturing production growth clocked in at just 0.1% last month, which was below the 0.3% forecast. Furthermore, the previous month’s release was revised down to show a 1.2% decline.

Meanwhile, NIESR released its GDP estimate, projecting that the U.K. economy grew by 0.5% during the third quarter. While this is nice and dandy, it still doesn’t match up with the upwardly revised 1.0% growth we saw during the 2^nd quarter.

No data lined up today, but that doesn’t mean you can chill out. The Bank of England will be making its interest rate decision tomorrow and for all we know, traders may begin positioning themselves as early as today. Good luck trading, homies!

[PipDiddy]

Doji alert! Without anything on tap from the U.K., GBP/USD finished the day almost unchanged from its opening price. The pair was down by 7 pips at 1.5994 from its opening price when the New York session closed.

Don't think that we didn't see any action on the pair though! The announcement of the re-election of President Obama boosted the pair to an intraday high of 1.6044. However, worried remarks from the European Commission regarding the EZ economy soon spurred risk aversion and sent GBP/USD trading lower.

Today will probably be a big day for the pound. Note that the BOE is set to make its rate statement at 12:00 pm GMT. No one expects the central bank to raise rates. However, with recent economic data from the U.K. having taken a turn for the worse, we could see some weakness in the pound if the central bank comes off dovish.

Make sure you don't miss it, ayt?

[PipDiddy]

GBP/USD’s price action yesterday was as crazy as a loon! At first, the pair consolidated within a tight range. And then, just when the European trading session opened, the pair broke out to the downside and forged fresh 2-week lows. But that wasn’t the end of it! When the BOE announcement came, traders suddenly changed moods and decided to buy the pair up, allowing it to close near its opening level that day.

The Bank of England’s interest rate decision came in line with expectations. The central bank chose not to pump more cash into the economy and keep the rates unchanged at 0.50%.

Apparently, some members of the central bank are worried that inflation might get out of hand if they ease again. Nevertheless, a few economists are betting that the BOE will expand the asset purchase facility by another 50 billion GBP during the first quarter of 2013.

Today, the country’s trade balance will be the report to keep an eye out for. It’s scheduled to be published at 9:30 pm GMT and is expected to show a 9.1 billion GBP deficit. Last month, the deficit was at 9.8 billion GBP.

[PipDiddy]

The pound was cruisin' up the fast lane early on in Friday's trading, tapping an intraday high at 1.6020 against the dollar, when the bears suddenly rained on its parade. GBP/USD then fell like a rock and closed the day with a 77-pip loss at 1.5903.

Once again, risk aversion was the culprit for the pound's loss as concerns about the euro zone continued to weigh on investors' appetite for risk. In fact, traders were so jittery that they merely shrugged off the positive trade data released from the U.K.

It was reported that British exports increased and imports decreased in September, resulting to a narrower trade deficit of 8.4 billion GBP for the month from -10 billion GBP in August. The reading even topped the market consensus which was for a 9.1 billion GBP deficit but still, the pound didn't get any lovin'. Bummer, eh?

We don't have any report from the U.K. today which will probably leave the pound at the mercy of market sentiment. But fret not! This week will be a big one for the pound with a series of tier-1 U.K. data on tap. Head on over to our spankin' awesome forex calendar and check 'em out for yourself!

[PipDiddy]

If I were to sum up Cable’s price action yesterday in one word, it would be “range.” Due to the absence of market-moving events and U.S. traders out celebrating Veterans Day, the pair simply moved sideways the entire day, finding resistance at 1.5916 and support at 1.5864.

Earlier today, the RICS House Price Balance survey was released. It showed that participants of the survey reported a bounce in new buyer inquiries in October. Specifically, 18% more respondents reported rises than falls. The supply side also rose at its fastest rate since April 2011. The data showed that 12% more participants reported that there was a rise in sellers.

More data will be coming your way today. At 9:30 am GMT, the U.K.’s Consumer Price Index (CPI) and the Producer Price Index Input (PPI Input) will be published. The October CPI is predicted to show that the inflation rate has risen to 2.3% from September’s 2.2%.

Meanwhile, the PPI for Input is expected to show a decrease of 0.4% in October from the previous month’s 0.2% decline.

Also note that if the CPI goes below or above Bank of England (BOE)'s 1.0%-3.0% target, also expect the BOE to release a letter to British Parliament explaining what happened and what measures are being done to fix the situation.