Hard Week for the British Pound (Weekly Review)

Rather weak data on the consumer inflation in the UK and the Eurozone, and rather strong inflation data in the United States had no significant impact on the dynamics of the British pound, euro and US dollar. Investors' attention was still focused on Britain’s negotiations with the European Union on the conditions for termination of its membership, and the news accompanying the process provoked either a rise or fall of the GBP, together with the EUR. Despite the resignation of a number of ministers of the government of Theresa May, the pound still managed to win back some of the losses incurred, but its position remains vulnerable, and this recovery can be used for sales.

Quite a problem for the Eurozone and, therefore, for the euro, is the situation with the budget of Italy that the EU disagrees completely. The increase in government spending laid out in it does not comply with the rules of the European Union, and the Italian government’s refusal to make appropriate adjustments may result in fines, that, in their turn, may cause dissatisfaction by the Italians and cause speculation on Italy’s exit from the EU.

Thus, we cannot yet predict improvement of the situation with the EUR after its recovery at the end of the week. Of course, there is a possibility that the EU will make certain concessions to Italy and agree with the UK, or the parties will decide to continue the terms of Brexit, and all this will trigger further profit-taking on short positions in the EUR and GBP. But so far there is no reason to be highly optimistic, and these currencies will remain in a vulnerable position, and the USD, taking advantage of the situation and the interest rate differential, can again rise against them.

Schedule for this week:

Monday, November 19
09:00 GMT – Eurozone. Financial Stability Report;
10:00 GMT – Eurozone. Construction Output;
15:00 GMT – USA. NAHB Housing Market Index (Nov);
15:45 GMT – USA. FOMC Member Williams Speaks.

Tuesday, November 20
00:30 GMT – Australia. Reserve Bank of Australia Meeting Minutes;
02:00 GMT – Japan. Bank of Japan Press Conference and Monetary Policy Report;

10:35 GMT – United Kingdom. Autumn Budget;
15:30 GMT – USA. Housing Starts;
14:00 GMT – New Zealand. GlobalDairyTrade Price Index;
18:00 GMT – Canada. Bank of Canada Governor Council Member Wilkins Speaks.

Wednesday, November 21
00:00 GMT – Eurozone. Decision of the European Commission on the Italian Budget;
04:30 GMT – Japan. All Industries Activity Index;
08:00 GMT – Eurozone. ECB Meeting;
09:30 GMT – United Kingdom. Public Sector Net Borrowing;
13:30 GMT – USA. Durable Goods Orders;
15:00 GMT – USA. Existing Home Sales.

Thursday, November 22
23:30 GMT – Japan. National Consumer Price Index (CPI);
23:50 GMT – Japan. Foreign Investments in Japanese Stocks;
23:50 GMT – Japan. Foreign Bonds Buying;
USA. Thanksgiving Day;
12:30 GMT – Eurozone. ECB Publishes Account of Monetary Policy Meeting;
15:00 GMT – Eurozone. Consumer Confidence.

Friday, November 23
07:00 GMT – Germany. Gross Domestic Product (GDP) n.s.a. (YoY) (Q3);
07:00 GMT – Germany. GDP;
08:30 GMT – Germany. Markit Manufacturing Purchasing Managers Index (PMI);
08:30 GMT – Germany. Markit Manufacturing Purchasing Managers Index (PMI);
13:30 GMT – Canada. Core Consumer Price Index (CPI);
13:30 GMT - Canada. Consumer Price Index (CPI);

13:30 GMT – Canada. Retail Sales;
14:45 GMT – USA. Markit Composite Purchasing Managers Index (PMI);
14:45 GMT – USA. Markit Services Purchasing Managers Index (PMI).

Author: Anthony Porter, IAFT Analyst