The pound ended the week on bearish terms versus the dollar despite the generally upbeat sentiment and eased woes over the outlook for the global economy and the debt crisis as the U.K. data generally remained downbeat and the BoE maintained the steady policy which also kept sterling without strong support.
Investors were expecting the BoE to hold the monetary policy unchanged and indeed the MPC opted to see the effect on the economy and developments in the sentiment and the debt crisis giving the time for the APF expansion to end which is expected in February which by then the new Inflation Report with the growth and outlook projections will help in providing clarity for policy markers.
This week the focus will be on the heavy data from the Kingdom and the United States with the inflation figures from both nations. Also the UK jobs report and retail sales are a key element to assess the state of the fragile economy as jobs continue to contract while sales are expected to have held against the odds with the discounts and the holiday season shopping.
The eyes will also be on the euro area and more auctions scheduled for this week and U.S. earnings as the overall market sentiment will also influence the movement and define the dollar status versus the pound. We see the chances for the pound to gain on good data shall the sentiment remain positive and risk appetite hold, as otherwise the pound will likely resume its bearish footsteps versus the dollar.
The release of the data this week will be as follows:
Monday January 16:
Both economies do not have fundamentals queued for release and the movement will be based on the market sentiment.
Tuesday January 17:
The United Kingdom is set to start the day with the Inflation Report for December at 09:30 GMT. UK CPI is expected with 0.4% rise on the month after 0.2% and on the year to slow further to 4.2% from 4.8% a comforting sign to the BoE and to markets to bet on more quantitative easing. Core CPI inflation is expected to slow as well to 3.0% from 3.2%.
The RPI Index is expected with 0.4% gain on the month after 0.2% and on the year to slow to 4.8% from 5.2% and excluding mortgage payments to slow to 4.9% from 5.3%.
As for the United States, the day will start at 13:30 with the January Empire Manufacturing index which is expected with improvement to 10.50 from 9.53.
Wednesday January 18:
The UK Jobs report for December will be the focus at 09:30 GMT. The economy is expected to have lost another 10,000 jobs after 3,000 thousand the previous month and the claimant count rate to hold at 5.0%. The ILO Unemployment rate for the three months to November is expected to hold at 8.3% while the average weekly earnings to hold at an annual 2.0% while excluding bonuses to tick slightly higher to 1.9% from 1.8%.
As for the United States a busy day starts at 13:30 GMT with the Producer Price Index for December where it is expected to ease on the month to 0.1% after 0.3% and on the year expected at 5.1% from 5.7%; excluding food and energy the index is expected steady at 0.1% and on the year to slow to 2.8% after 2.9%.
At 14:00 GMT the TIC flows for November are due after the total Net TIC Flows in October declined in October with total selling of $48.8 billion.
At 14:15 GMT the December Industrial Production index is expected with 0.5% rebound from the previous month’s 0.2% drop and capacity utilization to tick higher to 78.1% from 77.8%.
Thursday January 19:
The U.S. economy will release initial jobless claims for the week ended Dec. 24 and continuing claims for the week ended Dec. 16, where they will be available at 13:30 GMT. At 14:45 GMT, Chicago purchasing manager is estimated to retreat to 60.2 in Dec. from the previous 62.6. 15 minutes later, pending home sales for Nov. will signal 1.8% advance compared with the preceding 10.4% rise.
The U.S. will start the data at 13:30 GMT with the Inflation Report. The CPI index is expected with 0.1% rise on the month after holding unchanged the previous month and on the year to slow to 3.1% after 3.4%. Excluding food and energy the index is expected with 0.1% rise on the month after 0.2% gain and on the year to hold at 2.2%.
December Housing Starts index is also due the same time and expected flat at 685,000 while Building Permits are expected with 0.7% drop to 675,000 from 681,000.
As for the Jobless Claims for the week ending in January 14 it is also due at 13:30 GMT as usual after last week they rose 24,000 to 399,000 last week.
As for the Philadelphia Fed Index for January the index is due 15:00 GMT and expected to improve slightly to 11.0 from 10.3.
Friday January 20:
The United Kingdom is set to end the week with December retail sales at 09:30 GMT to see the impact of the holiday season on Sales. Retail Sales excluding auto fuel are expected with 0.6% rebound on the month following 0.7% decline.
The United States is set to end the week with the Existing Home Sales for the month of December at 13:00 GMT where they are expected to extend the gain with 5.2% to 4.65 million from 4.42 million.