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Sterling in uneasy equilibrium

Published: Monday 14 May 2018

  • Central bankers form today’s only news
  • Week gets more volatile after tomorrow
​​By David Johnson

If, like me, you are enthralled when a central banker speaks, then this is your lucky day. There is not much other than central banker speeches to consider, because the data diary has fewer entries than a sewer snorkelling contest. We will get five European Central Bank (ECB) members speaking, no less; two from the US Federal Reserve; and perhaps others who aren’t on the radar at this stage. Yay! The interesting meeting is a joint one being held in London between the Bank of England (BoE), ECB and US Federal Reserve (who needs an acronym).
Can Sterling stay still?
As mentioned earlier, there is no other ‘tier one’ data to concern us today, so traders will start looking forward to the rest of the week. Sterling starts the week in what looks like a state of equilibrium. $1.3550 and €1.1350 seem to be support levels for the Pound, but whether Sterling can stay there depends on the data in the next few days.
For the Pound, Tuesday’s employment and average wages data is the highlight. A small step back in average wages growth to 2.7% is likely, but there are commentators suggesting the unemployment rate may have fallen too. That would be, on balance, positive for the Pound and an improvement in average earnings would be a real boost, because it would start to improve disposable income.
What this week holds in store for the Euro
For the Euro, the highlights are Gross Domestic Product (GDP) data, Industrial Production and Consumer Inflation… oh and all the ECB speeches today. The Euro had a torrid week last week as the US Dollar strengthened and the threat of yet another Italian election loomed. Oddly though, the Italian economy is a bit like the traffic in London. It definitely flows better when the traffic lights fail. The Italian economy seems to perform better when there is no government. I am not advocating anarchy, by the way, it is just an observation.
Positive outlook for US Dollar
The big news for the USD will be retail sales data, Industrial and Manufacturing Output, housing market data and a number of sentiment indices. Plenty to go on and lots to talk about. Overall, the mood seems to be positive for the US Dollar, although rising oil prices traditionally weaken the USD. That said, America’s growing energy product production may counterbalance that more so than in the past.
Chinese data could hit raw material producers
Aside from these things, we will get Chinese Industrial Production. That impacts the raw material producers. Speaking of which, we will also see the Australian Consumer Confidence and Wage Price Indices as well as New Zealand’s Budget statement. Another raw material producer, Canada, will release retail sales and inflation data this week. The Canadian Dollar is gaining alongside the US Dollar, as the USA is Canada’s main export market.  
After a very quiet start, it promises to be a very busy week. Brace yourselves.
During the war
My Grandad was a WWII veteran. In just one day during the Battle of Britain, he destroyed eight German aircraft and disabled six more. He was, without doubt, the worst mechanic the Luftwaffe ever had.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 12:30 Canada: National Bank House Price Index 218.96 218.00

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