UK Data Rising Steadily
It’s been a stellar week for the UK, data-wise at least. First up we had a bumper set of employment figures on Tuesday which saw the unemployment rate falling back to levels not seen since the good old days of 2017. We never knew how good we had it before the pandemic, did we? Then, on Wednesday we saw October inflation data blasting through market forecasts to hit its highest levels in almost ten years. Finally, this morning we saw UK retail sales for October coming in well above expectations also at 0.8% MoM. This reading marks a solid rise from the prior month’s -0.2% reading and a firm beat on the 0.5% the market was looking for.
BOE Expectations
The uptick in data has re-sharpened the focus on BOE rate hike expectations. The bank was seemingly building up to a November rate hike, in line with strengthening data and hawkish BOE member commentary. However, GBP bulls were left empty handed as the bank held policy unchanged, albeit with a firm set of hawkish signals. Given the surge higher in inflation and the labour market since that meeting, market pricing is now suggesting a December hike is all but certain.
Political Uncertainty
Still, despite the strength in data, the UK political backdrop has deteriorated markedly. The controversy around the government “sleaze scandal” has cost the current leadership several points in the polls, raising uncertainty ahead of the next election. Additionally, concerns over the Government’s threat that it might abandon aspects of the Northern Ireland Protocol over its Brexit demands, is further darkening the clouds over UK politics.
Northern Ireland Brexit Issue
Today’s meeting between UK and EU leaders over the Northern Ireland Protocol issue will be closely watched. If it appears that divisions remain and a deal is still far from happening, this is likely to act as a headwind to any data-fuelled GBP strength. Current GBP price action suggests that expectations around the event are not high as GBP is currently seeing broad selling pressure.
Technical Views
GBPUSD
The recent rally off the 1.3349 lows saw price failing on the move above 1.3461. Price is now turning lower once again and with both MACD and RSI negative, there is room for the bear channel to continue lower. A break of the 1.3349 level will see 1.32 as the next main support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.