British Pound Outlook – November 16-20

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After a roller coaster week, lots of figures await traders of the British Pound: retail sales, consumer price index and the MPC meeting minutes stand out. Here’s an outlook for a busy week of events for the Pound, and an updated technical analysis for GBP/USD.

GBP/USD chart with support and resistance lines marked on it. Click to enlarge:

The positive move by the Pound was boosted by good employment figures, but then hurt by Mervyn King. The upcoming week starts with speeches, and then serious indicators are released. Let’s review the Pound’s 11 events this week:

1. Rightmove HPI: Britain’s earliest indicator for house prices is published early in the week – Monday at midnight GMT. This figure isn’t considered very accurate though. In the last two months, prices were rising according to this index, with a 2.8% jump last time. Prices are expected to rise once again this time.
2. Paul Tucker talks: BOE Deputy Governor Paul Tucker is one of the voting members in the Monetary Policy Committee (MPC). The MPC has different opinions about the size of quantitative easing program which shakes the Pound. Each vote counts, and every hint (such as the bearish hints here) by a member moves the Pound. Tucker will speak in Brussels on Monday at 8:15 GMT.
3. Andrew Sentance talks: Sentance is another member of the MPC, and also his words can move cable. He’ll be speaking at a different hour, 18:00 GMT, and might say totally different words.
4. Consumer Price Index: Britain’s CPI has been declining in the past two months, reaching 1.1% (annualized), on the brink of missing the annual target of 1-3%. Another slowing in the pace of price rises will hurt the Pound. It’s expected to climb to 1.4% though. Core CPI is also slowing down, but is still higher – 1.7%. It’s predicted to remain at the same level. Published on Tuesday at 9:30 GMT.
5. Retail Price Index: This is another inflation figure, published with the CPI, on Tuesday at 9:30. The RPI is of importance since it measures only consumable products, and since it has been falling – exposing the bad situation of declining prices. After a few months that showed a fall of 1.4% (annualized), it’s predicted to show a fall of “only” 0.9%.
6. BOE Inflation Letter: This event will complete the inflation releases. It will only be published if the inflation target is missed – CPI falls below 1% in this case. If this happens, Mervyn King will publish a public letter to explain the reasons for this, and especially the things he’ll do to tackle it. This could mean more Pound printing. Will tentatively happen on Tuesday.
7. MPC Meeting Minutes: Last month’s rate decision included a slightly better outcome: a smaller than expected quantitative easing expansion of 25 billion pounds, less than 50 billion that was expected. This helped the Pound. We’ll get to see how the members voted, and probably serious hints about the next decision. The publication, on Wednesday at 9:30 GMT, will rock the Pound.
8. CBI Industrial Order Expectations: This survey of 550 manufacturers shows the expectations for future orders. This number showed expectations for a decline in the past 16 months. No dramatic move is expected – only a slight improvement from -51 to -47 points. Published on Wednesday at 11:00 GMT.
9. Paul Fisher talks: Another public appearance by an MPC member means more shaky times, despite the timing – after the MPC Meeting Minutes. Fisher will speak on Thursday at 9:20 GMT.
10. Retail Sales: British retail sales have stayed unchanged in the past 2 months, disappointing the Pound. This time, they’re expected to rise by 0.6%. Like in every country, this is a major release. It happens in Britain on Thursday at 9:30 GMT.
11. Public Sector Net Borrowing: Mervyn King said that the government needs to cut spending urgently last week. Less borrowing means less spending. We’re expected to see the net borrowing cut by more than half this month – from 14.8 to 6.7 billion. Only a big surprise will have a strong impact, since it’s published together with retail sales, on Thursday at 9:30 GMT.

GBP/USD Technical Analysis

The Pound had a strong start to the week, breaking the 1.67 resistance line and reaching 1.67. It later fell. mostly by Mervyn King, as low as 1.6510 before recovering and closing at 1.6670, under the line.

Apart from 1.67, that now plays a less important role than in last week’s GBP/USD outlook, the serious resistance above is at 1.7042,  the  year-to-date peak from August.

Looking down, 1.6260 serves as a minor support line, after holding nicely from the beginning of October. Further down, 1.6110 is already a more serious support line. It served as such in September, and as a resistance line in October.

Far below, 1.5720 is a major line. This is where the Pound bounced back to start the major comeback.

Pounding the Pound

Even though the Pound broke the major resistance line, the troubles for the British economy are far from over. Lets not forget: Britain is still in recession.

I believe that a slip to deflation will add to the Pound’s problem this week. My sentiment remains bearish on the Pound.

Further reading:

• For a broad view of all the week’s major event in all currencies, read the  forex weekly outlook.
• For the Euro, read the  EUR USD Forecast.
• For GBP/USD, look into the  British Pound forecast.
• For the Australian dollar, read the  AUD/USD forecast.
• For USD/CAD, check out the  Canadian dollar forecast.

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