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Cable test Support in Quiet Holiday Session
Cable is trading near 1.5460 in quiet trade, near support levels without the London or US markets Monday. Sterling came under pressure late last week as the UK PM commenced EU reform talks at the leaders’ summit in Riga. The debate in the UK, meanwhile, ahead of an in-out referendum that will likely be called before the end of 2016, has already started in earnest, with some big businesses
This political background creates uncertainty for long-term investors, although the prevailing good fundamentals of the economy should prove an offsetting tonic for now given that there is reasonable ground to believe that the UK will eventually vote to remain in the EU. Cable is entrenched below 1.5500 following a dive from the post-election peak of 1.5815. The 20-day moving average near 1.5465 and the May-19 low at 1.5447 provide focal points on the downside.
Data this week include the CBI’s retail sector survey scheduled to be released on Tuesday for May, which is expected to rise to a +20 reading in the headline realized sales figure. Fundamentals are underpinning the retail sector, with unemployment at seven year lows and real average household incomes trending higher amid lower oil prices and related fuel and energy costs. Unsecured consumer credit has also been rising.
The second estimate of Q2 GDP is scheduled to be released on Thursday has us expecting a revision to +0.4% q/q and +2.5% y/y, which would mark a one basis point increase on both counts. The revision is partly based on better than expected production, which in the preliminary estimate assumed a 0.1% contraction before being revised to 0.1% growth. Other data due this week include BBA mortgage approvals for April which is scheduled for Thursday, expected at 39k, and which would be nearly unchanged from March levels.
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