GBP/USD had an excellent week, playing catch up with its peers amid optimism about Brexit and a very weak US dollar. PMIs stand out as we turn the page into February. Here are the key events and an updated technical analysis for GBP/USD.
A hint towards a softer Brexit by French President Emmanuel Macron and hopes that the British public is also leaning in that direction stirred optimism. UK GDP came out at 0.5% q/q. While 2017 saw weak growth in absolute terms and in comparison to other developed economies, the figure came out above expectations. US dollar weakness was a big story that began a few weeks ago but got another push by Mnuchin’s endorsement of a weak dollar. His comments were somewhat taken out of context and his boss, Trump, later cheered on a strong dollar.Nevertheless, the pound was a big winner and not only against the greenback.
Updates:
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
Net Lending to Individuals: Tuesday, 9:30. Higher lending to individuals implies increased economic activity. In November, net borrowing stood at 4.9 billion pounds, a bit higher than beforehand. A similar figure of 4.8 billion is expected.
Mortgage Approvals: Tuesday, 9:30. The official number of mortgage approvals stabilized in November and remained at 65K after a few months of drops. A similar figure is likely now. A small rise to 66K is predicted.
M4 Money Supply: Tuesday, 9:30. This measure of money in circulation ticked by 0.1% in November, lower than expected. The BOE monitors these numbers as an indication of inflation. A marginal tick up to 0.2% is forecast.
BRC Shop Price Index: Wednesday, 00:01. The British Retail Consortium’s measure same-store sales has been dropping for quite a while but the fall in December was more significant: 0.6%. We later learned that retail sales were indeed worse than expected. This leading indicator now provides the first insight into 2018.
GfK Consumer Confidence: Wednesday, 00:01. According to this survey of 2000 consumers, confidence is eroding: a score of -13 was seen in December, reflecting deepening pessimism. A repeat of the same score is on the cards.
Manufacturing PMI: Thursday, 9:30. The UK manufacturing sector has been enjoying the weaker pound: exports have become more attractive. This was also reflected in Markit’s forward-looking purchasing managers’ index for the sector. However, December saw a drop from 58.2 to 56.3 points, but this is significantly above the 50-point threshold that separates contraction from expansion. A score of 56.6 is on the cards now.
Construction PMI: Friday, 9:30. The second PMI coming out is for the construction sector, which hasn’t been doing that well. The figure dropped to 52.2 points in December. A minor drop to 52.1 is forecast.
