GBPUSD have suffered major loss last week, but many analysts expect it to recover soon. With the many fundamentals scheduled to be out in the next few days, a significant movement might happen this week.

GBPUSD have suffered major loss last week, but many analysts expect it to recover soon. With the many fundamentals scheduled to be out in the next few days, a significant movement might happen this week.

reversal

Concern On Wages Growth

Last week, Poundsterling fell to the lowest level since May due to BOE dovish view. Bank of England governor Mark Carney surprised the market by going back on his words. Again. Previously, he has said that BOE rate hike will hinge on the UK unemployment rate. However, after UK unemployment rate fell even lower than the predetermined treshold, Carney keep mentioning various reasons to stall. The first is the issue of housing bubble, and then now it is about stagnated wage growth. Speaking in press conference of BOE quarterly inflation report, He suggested that interest rates might not be hiked till next year because of slow wages growth.


UK
UKA Comparison Of UK Unemployment Rate and UK Average Weekly Wages January 2010-July 2014


Actually, Carney's concern about UK wages growth is understandable. The UK currently has one of the best economic climate in the world, with unemployment rate dropped to the lowest since 2009. However, wages growth remain weak, stalled around the same level since 2013, and at times fall lower than the previous period. The problem is, Carney does not have a particular treshold for wage growth, makes it quite impossible for people to calculate when and whether rate hike will happen, and whether this concern is actual or unnecessary.

The market that has been expecting BOE rate hike since the end of 2013 quickly showing their disappointment. Sterling plunged faster than the time it took for Carney speech. Many started to speculate of the reason why Carney hesitated. Some said that Carney might be unsure of the UK strength to withstand rate hike, while some MP accused him of attempting to delay rate hike until after next year's election that was scheduled to be held on May 2015.

Rate Hike In November?

Meanwhile, analysts are quite optimistic that the BOE will rise rates within this year. Bloomberg mentioned that Barclays predicts the UK central bank will hike rate in November, compared to US the Fed that will wait till June. Estimates for the sterling is similarly positive; it is expected to retest the multi-year highs, with Barclays expect it to strengthen to 1.71 by the end of September.

Accordingly, we will see several UK data incite market responses this week. Although the week is packed with US-based data, there are three major events related to the GBP that traders will need to observe:

1. UK CPI
In the next few hours, the UK will release CPI data that is expected to slow from 1.9% to 1.8%. If the actual data fall even lower, then it is possible for GBP to drop rather than recover.

2. MPC Meeting Minutes
Minutes from the latest BOE's Monetary Policy Committee meeting will be released tomorrow, August 20th, and is expected to carry out hints about what the BOE officials actually consider. If it supports Carney dovish stance, then the GBP could drop again. Contrarily, any hint that the officials are opposed to pending rate hike shall drive the GBP higher.

3. UK Retail Sales
Last but not least, July 2014 retail sales data (MOM) is expected to up 0.4% compared to 0.1% in the previous month. However, the latest average weekly earnings drop as much as 0.2% in the second quarter of 2014 might represent itself in lower retail sales record.

No doubt, this is a precarious times for Pounsterling. The GBPUSD pair currently is still flat, but that condition may not last long. If you trade GBPUSD, be aware that changes might come any time now.


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