Recent soft UK data raise doubts over Bank of England hawkish sentiment. The near term price action remains on the BoE policy action and not discounting the UK political uncertainty.
Review of the previous week data:
- UK Manufacturing PMI at three-month low of 54.3 in June.
- UK construction sector recovery loses momentum in June printed at 54.8 vs 55.0.
- UK slower rise in service sector activity down in June 53.4 vs 53.8
- Industrial Production -0.1% vs. 0.2%
- Manufacturing Production -0.2% vs. 0.2%
- Trade balance -11.9B vs -10.6B
Employment report (July 12) is only the key risk event scheduled this week. Labor market data potential for upside surprise but wage growth remained weak.
UniCredit: The unemployment rate probably held at 4.6%, with risks skewed towards a further fall to 4.5%.
Average weekly earnings growth excluding bonus payments probably increased to 1.9% yoy in the three months to May but it remains weak and well below its precrisis average of around 4%.
UBS: Consensus expects the UK labour market to gain 130k jobs 3M/3M (prev. 109k) in May and the unemployment rate to remain steady at 4.60%. Avg. earnings growth is expected to decline further to 1.8% y/y (prev. 2.1%).
Barclays: We forecast the ILO unemployment rate to print unchanged at 4.6%. Wage growth, however, will remain bleak. We expect a marked deceleration in headline average weekly earnings, on poor bonuses, at 1.7% 3m/y for May (consensus: 1.8%) after 2.1% 3m/y in April.
The cross spotted with a bullish ascending wedge on the daily chart, strengthens if settles above 0.8880/0.89.
It has been consolidating above the breakout level given on Friday. Near term trading range remains between 0.8900 and 0.8720/0.87 propel above 0.90 is the final destination. Alternatively, retracement expected to 0.88 and 0.8720 initially.
Near-term trading supports find at 0.8750, 0.8700 below this 0.8650 exists. The 61.8% (0.8312 April low-0.8865 high) finds at 0.8525. Potential resistances seems at 0.8865 and 0.8880/0.8900 it’s 61.8% (0.9265-0.8304 fall).
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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