U.K. Jobless Claims and Quarterly Inflation Report May Lead to Whipsaw Price Action
Jobless claims in the U.K. are expected to drop another 20.0K in April after falling more than expected in March, while the Bank of England is scheduled to release their quarterly inflation report at 9:30 GMT. Following the central bank’s decision to maintain interest rates at 0.50% and keep their asset purchase target at 200B on May 10th, the report is set to provide the first statements from Governor King since the date for elections was set, as the central bank doesn’t release a statement if no action is taken at their policy meeting. Indeed, the British pound has been recently weighed by the speculation and result of a hung parliament paired with fears of contagion surrounding the sovereign debt crisis in the euro area.
Furthermore, growth in the British economy advanced 0.2% in the first quarter, half the pace of the previous three months, while unemployment rose to a 16-year high in the quarter through February. On the other hand, inflation breached the central bank’s upper limit for the second time this year, and prices are likely to accelerate further as producers continue to pass higher costs to consumers. Nevertheless, recent advances in house prices, mortgage approvals, and manufacturing showed that the economy is improving, and may lead Governor Mervyn King to drop his dovish bias for price growth.
EUR/GBP: The pair continues to trade within a descending channel, with the 20-day SMA forming as a line of resistance. However, it is noteworthy that daily studies are nearing oversold territories, and are warning the need for a hearth corrective bounce.
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Written by Michael Wright, Currency Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.