UK CPI (Consumer Price Index) – Tuesday the 19th of May 9:30am
Welcome to the Risk Events video for the week beginning the 18th of may 2015. There is one stand out trade of the week and that is to basically look for the GBP/USD to continue heading up. The reason for that is because last week we had a run of really negative US data. Which, of course, the the market is really scared about at the moment. And the sentiment on the USD is really weak.
The USD is still the strongest currency fundamentally in the long term but in the short term you definitely don’t want to be buying USD at the moment. In fact you want to try sell them with that short term sentiment. With the data last week, particularly Friday’s data, we saw another push down on the USD and another push up on pairs like EUR/USD, GBP/USD. We are looking for the GBP/USD to continue up next week. First of all of the back of that, secondly of the back of the expectation for positive data this week. We got UK retail sales coming out which is expected to be positive after a negative reading last time around.
It all hinges on the UK CPI on the Tuesday the 19th of May at 9:30 London Time. UK CPI is expected to come out flat 0. The Bank of England have said they expected it to come out flat. They even maybe expect a little bit of a negative dip into the minuses just for this month or for the next month. Hovewer, over the summer it should start bouncing back and going up. Now the trade on the GBP/USD will depend on the UK CPI. If we get a positive reading that’s fantastic. If it comes out at 0 and even if it comes out in -0.1 it’s still good. However, if you get pretty bad reading from this we could call the trade off. The GBP/USD might lose it’s vibe because of this. However if UK CPI remains steady we could see GBP/USD strengthened through the week. Particularly of the back of that dollar weakness, particularly if those weak data points from the US comes through. So that’s the pair that you want be focused on through the week.
Now I’m not saying buy GBP/USD from the open I’m saying look for buying opportunities and keep your eye on the UK CPI reading. Also keep your eye on the US data points and UK retail sales as the week progresses. What you definitely want to be doing is looking for buying opportunities on the GBP/USD. But make sure you are protected just in case the UK CPI reading comes out lower. Other than that, we should see that pair is supported in the environment we currently have with a weak sentiment on the USD and pretty good sentiment going on with the GBP. So that’s the big trade of the week, that’s what you want to watch out for.
Keep the close eye on that and of course all the other data points from the UK and US. But generally for the coming week you want to be looking for buying opportunities on the GBP versus the USD.