Weekly Outlook (28/04/15- 02/05/14)

GBP had an uneventful week and was practically unchanged. GBPUSD closed the week just shy of the 1.68 line. This week’s highlights are Preliminary GDP and Construction and Manufacturing PMIs. Here is an outlook for the main events moving the pound;

In the UK, Retail Sales sagged in March but managed to beat the estimate. Over in the US, key releases pointed in all directions last week. Employment and housing data disappointed, but manufacturing and consumer confidence numbers looked sharp.

1. Preliminary GDP: Tuesday, 8:30. This is one of the most important economic indicators and should be regarded by traders as a market-mover which could affect the direction of GBP/USD in a hurry. It is released every quarter, magnifying the impact of each release. The indicator continues to point to solid economic growth and posted a gain of 0.7% in Q4. The markets are expecting better news out of Q1, with an estimate of 0.9%.


2. 10-year Bond Auction: Tuesday, Tentative. The average yield on 10-year bonds rose to 2.93% in the February release, marking a five-month high. As a minor event, the release is not likely to impact on GBP/USD, but helps analysts gauge the level of investor confidence.


3. GfK Consumer Confidence: Wednesday, 23:05. Despite a stronger British economy, consumer confidence remains mired in negative territory, pointing to a pessimistic British consumer. However, the indicator has been steadily improving, and last month’s reading of -5 points was a five-year high. The estimate for the March release stands at -4 points.


4. BOE Chief Economist Spencer Dale Speaks: Wednesday, 15:30. Dale will testify before the Treasury Select Committee in London. Analysts will be looking for any hints regarding the BOE’s future monetary policy, particularly interest rate levels.


5. Nationwide HPI: Thursday, 6:00. The index is an important gauge of activity in the housing sector and also helps measure the depth of consumer spending. The indicator dipped to 0.4% in March, its worst showing in close to a year. This fell short of the estimate of 0.7%. The markets are expecting better news in April, with the estimate standing at 0.6%.


6. Manufacturing PMI: Thursday, 8:30. The index has been posting releases in the mid-50s range, indicative of expansion in the manufacturing sector. More of the same is forecast in April, with the estimate standing at 55.4 points.


7. Net Lending To Individuals: Thursday, 8:30. Borrowing is closely linked to consumer spending, a key engine of economic growth. The indicator has been steady, coming in at GBP 2.3 billion last month. The markets are expecting an identical reading got the April release.


8. BOE Deputy Governor Jon Cunliffe Speaks: Thursday, 17:30. Cunliffe will address the banking community at an event in London. Remarks that are more hawkish than expected is bullish for the pound.


9. Construction PMI: Friday, 8:30. The week wraps up with a key event, Construction PMI. The index continues to hover above the 60-point level, indicating strong expansion in the construction industry. Another strong reading is expected this week.

As you can see, this coming week is set to be very eventful, and with the markets at new highs, it may be worth taking advantage of current exchange rates, or hedging yourself at the very least by half cost averaging your purchases or putting in stop losses and limit orders. (For more information about these financial tools please contact me directly)

For clients who are buying Sterling from Euros or Dollars it may be worth watching this week for any weakness, however it seems like the exchange rates of last year on the Euro (1.14-1.17) are long gone, so it may be worth cutting your losses; however for a more detailed outlook please don't hesitate to contact me.