A crucial day for Sterling with a number of important releases, its likely we will some strong movements today.
Following the electorates’ decision to leave the EU UK data releases have proved more crucial than ever as a way to gauge the health of the UK economy. The Bank of England (BoE) has already cut interest rates to a new record low of 0.25% in a bid to stave off a possible recession. Mark Carney, the head of the BoE recently stated he feels this was the correct decision and the UK economy is in a better place as a result. I am not so sure it was so much to do with the rate cut, but more to do with the cheap price of the pound, a decent British summer and the UK residents resolve to keep calm and carry on.
We have seen some very positive data release of late particularly in retail sales and manufacturing. Manufacturing showing the single biggest improvement in a month for twenty-five years. The question is will these positive data releases continue?
Today at 09.30 will see the release of Producer Price Index (PPI) which provides the changes in price in UK manufacturing. Consumer Price Index (CPI) data also comes in at the same time. CPI is a comparison between the retail prices of a representative shopping basket of goods and services and is a key measure of inflation. It will be interesting to look at both CPI and average earnings which is released tomorrow at 09.30, if inflation is up and earnings down this could stifle a recovery for the UK economy. I do feel this is a probable outcome, which could cause the pound to dip in value.
Tomorrow will also see the release of unemployment figures at 09.30. I do not expect any significant change so I do not think this will have much bearing on Sterling value.
Retail Sales are due out at 09.30 on Thursday and it will be interesting to see if the data is positive considering last month’s very impressive figure. The general consensus is there will be decline. There is also the matter of the interest decision, but following the recent cut, it is highly unlikely there will be any change.
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