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11 Sep 2013
Flash: GBP – give an inch, take a mile? – Rabobank
FXstreet.com (London) - Jane Foley, strategist at Rabobank eye’s GBP/USD risk factors.
Key Quotes:
“In tune with the resilience of employment during the economic downturn and in line with the better tone in recent UK economic data, the market is expecting the number of jobless claims to drop by 21K in August. The unemployment rate is expected to hold at 7.8%”.
“In any case a fall in unemployment does not automatically means that UK rates will then move higher”.
“…the market judged that Carney did not use the late August speech to push back forcefully against market expectations that UK rates could rise in 2015 or even as soon as late 2014. The short statement issued after the MPC’s policy decision late week was another lost opportunity to drive home a dovish message. As a consequence the market has had free reign to decide that the better tone of recent economic data means that the BoE could be one of the first G10 central banks to hike rates this cycle and this view has supported sterling”.
“…high inflation has meant that UK consumers have suffered three years of falling real wages. This leaves the outlook for demand remains vulnerable. That said, UK consumers appear to be supporting consumption levels by savings less. While this is good for current growth levels, it may create problems for the longer term”.
“This backdrop suggests that there is a strong chance that the BoE will soon clarify its dovish position. Therefore, while strong UK data near-term suggest that sterling buying interest may continue for now, there is risk that the pound is approaching the top of its range against both the USD…”.
“Aside from the risk that Carney will more forcefully push back against the recent rise in market rates, cable is vulnerable to another bout of strong US data. While the economic calendar has been light so far this week, Friday will bring the release of the August US retail sales data. Near term resistance lies at the June high near GBP/USD1.5752”.
Key Quotes:
“In tune with the resilience of employment during the economic downturn and in line with the better tone in recent UK economic data, the market is expecting the number of jobless claims to drop by 21K in August. The unemployment rate is expected to hold at 7.8%”.
“In any case a fall in unemployment does not automatically means that UK rates will then move higher”.
“…the market judged that Carney did not use the late August speech to push back forcefully against market expectations that UK rates could rise in 2015 or even as soon as late 2014. The short statement issued after the MPC’s policy decision late week was another lost opportunity to drive home a dovish message. As a consequence the market has had free reign to decide that the better tone of recent economic data means that the BoE could be one of the first G10 central banks to hike rates this cycle and this view has supported sterling”.
“…high inflation has meant that UK consumers have suffered three years of falling real wages. This leaves the outlook for demand remains vulnerable. That said, UK consumers appear to be supporting consumption levels by savings less. While this is good for current growth levels, it may create problems for the longer term”.
“This backdrop suggests that there is a strong chance that the BoE will soon clarify its dovish position. Therefore, while strong UK data near-term suggest that sterling buying interest may continue for now, there is risk that the pound is approaching the top of its range against both the USD…”.
“Aside from the risk that Carney will more forcefully push back against the recent rise in market rates, cable is vulnerable to another bout of strong US data. While the economic calendar has been light so far this week, Friday will bring the release of the August US retail sales data. Near term resistance lies at the June high near GBP/USD1.5752”.