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UK data: what to expect?

This week’s market focus will be on the UK inflation (Tuesday) and employment data (Thursday). How can these releases impact the GBP exchange rate?

CPI index on Tuesday could fall to a lowest level since the year 2009: the headline figure is expected to slow down from 1.5% to 1.4%. A drop in inflation will likely increase the bearish demand for the cable as the BOE stays in no hurry in raising interest rates.

Source: ForexFactory

Labor market figures in Thursday could, on the contrary, surprise to the upside. UK unemployment rate is expected to lower from 6.2% to 6.1%, while Average Earnings Index 0 to pick up from 0.6% to 0.7%. This could be the first index growth since March 2014. Jobless Claims will likely show continued contraction. The news could offer support to the British currency.

Still, Bank of America Merrill Lynch is looking to push back expectations of an interest rate rise: "After increasing in spring and summer, some of the pressure for an imminent rise in interest rates has eased. The risks of a later rise in interest rates than our current expectation of February 2015 are rising".

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