Sterling traders look to UK data points and leadership battle
Sterling traders are braced for increased volatility this week as the United Kingdom economy releases a slew of high-impacting data points, while the UK Conservative party leadership race comes to a conclusion. The British pound has remained in doldrums against the U.S Dollar, despite the Federal Reserve pledging to cut rates at the end of this month. The British pound is likely to see increased trading activity as the UK economy releases key unemployment, wage, inflation, and retail sales figures over the next few days. The data releases come at a time when UK economic data is starting weaken, following a modest uptick in activity during the first quarter of 2019.
Today, the bar is set fairly high for UK data, with most economists predicting that UK unemployment will fall in June, while UK average earnings will rise. Sterling may rise if UK data comes in as expected, although traders should note that Bank of England Governor Mark Carney is set to deliver a scheduled speech later today. Governor Carney has been notably dovish about the UK economy lately, alongside other important MPC voting members, who have been calling for a UK rate cut if the UK leaves the European Union on October 31st without a deal. More bearish comments from Governor Carney today could off-set any better than expected UK data.
Forecasts for UK inflation and retail sales look less-than promising later this week, with UK inflation tipped to remain flat on a monthly basis, while UK retail sales are predicted to contract by 0.3 percent last month. Markets will also be aware that UK Conservative Party members have until the weekend to officially back either Boris Johnson or Jeremy Hunt to replace Theresa May.
GBP/USD Mountain Chart | Source: ActivTrader
The British pound has had a soft start to the weak against the U.S Dollar and now trades below its key weekly pivot point, at 1.2530. Further weakness below the 1.2500 level may prompt a test of the 1.2480 and 1.2450 support levels. Moves above the 1.2530 level could provoke another test of the 1.2550 and 1.2575 resistance levels.
Written by Nathan Batchelor, External Analyst, ActivTrades
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