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UK jobs & inflation the key releases this week

The Pound's recent recovery/respite lacked any major impetus...



The last 10-days or so has seen the Pound largely flat against most currencies. Obviously not what £ sellers want to see, however it was the best outcome many had predicted. The recovery/respite was tepid and to prove this, it took 13-days to reverse a recent 3-day fall versus most of the G10. 

This shows that the Pound is struggling overall and it's hard to see where the upside comes from at this stage. Looking ahead, the UK releases the most important data this week that will attract attention. Wages have a chance to come in softer with unemployment climbing slightly tomorrow, which would then lower odds of the BoE raising interest rates any further.

More importantly, Wednesday's inflation figures are key to what the BoE and the Pound do next. Remember, the core inflation rate is the more relevant number and after a sizeable fall last time out, we could see something similar again which would be consumer positive, but £ negative.

Retail sales is an important factor to the economy with the UK being a services nation and so along with the consumer confidence data, we can expect a volatile end to the week for Sterling.

The single currency too had a side-wards week against a basket of currencies and continues to be out-of-favour amongst traders and investors alike. The Euro offers a bit more this week in terms of economic releases, but nothing really market mover worthy and so much of the same can be expected.

The Dollar gained in value towards the end of last week across the board and looks set to gain more this week. US inflation ticked up ever so slightly last Thursday and it means 2-months of consecutive inflation strength, which has spooked some in the market. 

The 2% Fed target isn't a million miles away (3.7% currently). But, the bank may choose to take out an insurance policy of slightly raising the interest rate one final time to ensure they get there (if recent inflation readings are seen as sticky). This will strengthen the USD if it becomes a reality and is the reason for the recent $ strength.