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Particular Focus on the U.K. This Week

The run up to the Easter Bank Holiday weekend is likely to be a quieter one both in terms of trading volumes and major economic events, especially when compared to the 10 days or so that preceded it. That said, there are still some important pieces of economic data that is due out, with a particular focus this week on the U.K..

The U.K. economy has been somewhat off the radar in recent months, overshadowed in part by the announcement of June’s EU referendum, but also by the fact that the BoE has been one of the few inactive major central banks around the world. It finds itself somewhere in the middle of the Fed and the ECB/BoJ in that the data does not justify the start of a tightening cycle but also doesn’t require further monetary support.

This will only remain the case though as long as inflation lingers below the target and the consumer keeps the economy ticking along despite wages growing at just above 2%. This week’s CPI inflation and retail sales figures are therefore going to be followed very closely for signs that the economy is stalling and more assistance is needed from the central bank, a possibility that we’re already hearing murmurings of, despite the rhetoric remaining that the next move is more likely higher than lower for rates.

There’s also be a focus on the U.S. towards the back end of the week, with GDP and durable goods data being released. The markets have finally come round to the idea that there will be a rate hike this year, but it’s unlikely to take much to test this once again. While these are not among the most important indicators that the Fed will be using when making its decision – although GDP is of course a very big economic release – they do provide great insight into how the economy is coping with tightening conditions and slowing global economy, and whether this is sustainable. Markets would be unwise to turn a blind eye to them.

The eurozone PMI numbers will also be key on Tuesday. The economy has been recovering very gradually over the last few years and it has come without its tests. The latest is a slowing global economy and trade, which already appears to be having a detrimental impact on its manufacturing sector. The PMI readings in recent months have been on the decline, particularly in the manufacturing sector which will be a concern.

They’re only marginally above 50 as it stands which suggests the industry could be headed for contraction, creating more economic challenges this year, which will likely weigh further on growth. With the euro having appreciated sharply in the last couple of weeks, further headwinds may lie ahead and more pain in the PMI data.

Economic Calendar [1]

For a look at all of today’s economic events, check out our economic calendar [2].

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam [6]

Senior Market Analyst, UK & EMEA at OANDA [7]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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