UK data flurry unlikely to be of much boost to stumbling pound – Forex News Preview
Posted on June 14, 2021 at 3:34 pm GMTRaffi Boyadjian, XM Investment Research Desk
There’s a slew of data coming out of the UK this week, starting with jobs numbers on Tuesday, inflation on Wednesday and retail sales on Friday, all due at 06:00 GMT. However, although the latest readings on those key monthly metrics are expected to underscore the view of a recovery that is gaining momentum, the pound will probably not be easily fazed by the data. Renewed UK tensions with the EU and a spike in Covid infections have dampened somewhat the near term outlook for the British currency. But in the broader picture, it is the US dollar’s steady ascent since late May that is making its mark in the FX sphere.
Big rise in employment is anticipated
Britain’s economic output was a whopping 27.6% higher in April compared to a year ago when the country was in a complete lockdown. More importantly, GDP was just 3.7% shy of pre-pandemic levels, underlining how far the recovery has come. There’s likely to be more of the same from the upcoming data, which are expected to highlight further progress in the economy’s healing, as well as potentially some warnings signals about higher inflation.
Starting with Tuesday’s labour market report, the number of people in employment is forecast to have risen by 150k in the three months to April, up from 84k in the previous three months. The jobless rate is expected to have ticker 0.1 percentage points lower to 4.7%, while average weekly earnings are projected to have increased by 4.9% year-on-year in April.
The government’s generous furlough scheme has kept job losses to a minimum during the pandemic and only 7% of the UK workforce were thought to still be supported by the state at the end of May. It’s possible that the unemployment rate could begin to edge back up again after the programme ends on September 30. But unless the virus situation was to worsen so dramatically that some restrictions had to be reintroduced, it’s unlikely that the phasing out of the furlough scheme will have a particularly catastrophic effect.
UK inflation below 2%…for now
On Wednesday, markets’ attention will turn to inflation – not that it is ever out of the spotlight these days. It is interesting to note, however, that inflation has so far been relatively contained in the United Kingdom compared to America and even the Eurozone. The stronger exchange rate has had some impact in fending off the upward price pressures but it’s unclear how long this will last. Plus, producer input prices are soaring – they are expected to have hit 10.6% y/y in May – so it could only be a matter of time before UK inflation…
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