WEEK AHEAD: MAY 17

Short Description

This week ahead I’m analysing the British pound cross forex pairs given all the UK economic data. I also discuss upcoming Fed minutes when I rundown the economic calendar. Thanks! Rich

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Trading GBP forex crosses | Fed minutes 

 

 

Hi everyone, I’m previewing what is another economic data-heavy week for forex markets. The big one is the FOMC minutes given all the fear out there about inflation but there’s also some top tier UK data so I’ll be taking a look at some of the pound crosses for trading opportunities.

Now let’s have a look at the key events before I discuss the GBP-crosses in a bit more detail, including some fundamental and technical analysis. The UK data to watch is not so much the unemployment because the British government is still backstopping a of lot of would-be unemployment. It’s more about the inflation data and retail sales data for a take on how hot the economy is running, given the large number of Brits that are now vaccinated against covid. The Fed minutes as always, are a little stale, especially since policymakers won’t have known about the big jump in US CPI for April - but it could easily still be a market-mover.

Outside of the economic calendar, there are still some interesting Q1 earnings to look out for from the likes of Tencent, Walmart, Cisco, JD.com and Vodafone. 

I’m going to start with the chart that I like the most and that’s the pound-Swissie. There is a very clear down-sloping trendline on the weekly chart that has been broken and for now successfully re-tested, suggesting a long-term change of trend to the upside.

The next chart I want to look at Pound-yen. It’s still under the peak formed in 2018 but the break above the 150 round number and successful re-test – similar to the re-test of the downtrend-line in the pound-Swiss franc – is interesting.

The last one is probably the least interesting chart of the three but arguably the most important. For now, the euro-pound chart is still inside its 5-year trading range but there is an interesting rising trendline that looks susceptible to a break lower on more pound-strength.

I talked about Sterling the week-before-last ahead of the Bank of England meeting, which turned out be more hawkish than expected with what many deemed a ‘mini taper’. There are a rising number of reasons to get a little more positive on the pound, not least that the vaccination rollout is expected to see the country open up in the summer, Brexit uncertainty is more-or-less behind us and now the Bank of England seems more hawkish.

What has set the Bank of England apart from the Fed is that it has started down the road of tapering QE, meaning less money-printing that devalues the currency. 

The buzzword across financial markets at the moment, as I spoke about last week, is inflation. This week’s UK inflation data could be a turning point for the pound. The UK releases all its measures of inflation – CPI, RPI and PPI altogether. If collectively, inflation is higher than expected, unlike the Fed, the Bank of England could react by more tapering or eventually raising interest rates at future meetings.

Right thanks everyone, good luck trading this week and make sure to subscribe so you don’t miss the next episode of the week ahead.