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Sterling traders braced for trio of data

If you’re trading pound crosses or the FTSE 100 stock index, there are some important market-moving events to put in your trading diaries this week.

UK inflation and Gross Domestic Product figures are to be published on Wednesday and Friday respectively, which will give investors more hints on how soon the Bank of England might look to raise interest rates.

Official retail sales figures from the Office for National Statistics for April are also out on Wednesday to give traders a glimpse of the health of the UK economy.

If you’re betting on the pound rising you’ll want to see signs of sustained underlying inflationary pressures, plus an upward revision to the GDP forecast and a recovery in consumer spending.

What’s expected?

Market consensus expects core inflation, considered the most accurate picture of underlying inflation trends as it excludes food and energy prices which are often volatile, to climb to 2.3% from 2.2%, with the headline rate staying put at 2.5%. Retail sales are expected to improve slightly (+0.5%) after disappointing in March. The ONS is not expected to revise the preliminary estimate of 0.1% growth.

If the data is weaker than expected, don’t expect any let-off in the selling pressure on the pound, which has hit its lowest level versus the dollar since the start of the year. That will also keep boosting the FTSE 100, which tends to rise when the pound falls – and vice versa – as the index of leading London-listed stocks is dominated by large international firms who make lots of money overseas in dollars. So if the pound strengthens, their dollar revenues are worth more and vice versa.

Pairs to watch: USD/GBP, EUR/GBP, GBP/JPY

USD/GBP daily chart

USD/GBP daily chart

Chart: Intertrader

Published: 22 May 2018

You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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