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Forex: Pound Braces for Volatility on BOE Minutes, Jobless Claims Data

Forex: Pound Braces for Volatility on BOE Minutes, Jobless Claims Data

Ilya Spivak, Head Strategist, APAC

The British Pound looks set for a volatile session as traders look to minutes from Augusts’ BOE meeting and July’s jobless claims data to refine monetary policy bets.

Talking Points

  • British Pound Volatility Likely on BOE Minutes, Jobless Claims Report
  • Euro May Rise as 2Q GDP Data Limits Scope for Further ECB Stimulus

The Bank of England is set to release minutes from this month’s monetary policy meeting. Investors will be keenly interested to see the vote tally for and against the adoption of the central bank’s guidance-based policy framework. Details of the discussion surrounding the selection of economic data thresholds to be used in communicating policy objectives ought to prove interesting as well. The formulation of the BOE’s inflation-based “knock-out” – which says the commitment to keep the benchmark rate at 0.5 percent will be reconsidered if price growth is seen above 2.5 percent in 18-24 months – may be of particular note.

The introduction of this condition seemed to be the catalyst that drove the British Pound higher after guidance was unveiled in last week’s Inflation Report publication. As it stands, interest rate futures are pricing in the first BOE rate hike in the second half of next year, much sooner than the 2016 time frame implied by the Bank’s projected path for the unemployment rate. With that in mind, the currency may see selling pressure if today’s Minutes reveal a significant contingent on the rate-setting MPC committee favored setting a higher inflation “knockout” or leaving it out altogether.

Furthermore, July’s UK Jobless Claims data may take on added significance now that the BOE has tried monetary policy to labor market performance. Economists expect a 15k drop in applications for unemployment benefits. A disappointing outcome may be seen as implying that reaching the BOE’s 7 percent threshold on the jobless rate will take comparatively longer, extending the perceived longevity of ultra-loose monetary policy and punishing the Pound. Needless to say, a better-than-expected print will probably prove supportive for the UK unit.

Elsewhere, the preliminary set of second-quarter Eurozone GDP figures is set to show region-wide output grew 0.2 percent, producing the first quarterly increase since the three months through September 2011. Germany, the currency bloc’s largest economy, is forecast to expand 0.6 percent, the most in over a year. Such results stand to reinforce a notable improvement in economic news-flow over recent months and may be interpreted to limit scope for further ECB easing. This may prove supportive for the Euro as prices continue to track the relative monetary policy outlook (as implied by the spread in front-end bond yields).

New to FX? Watch this Video. For live market updates, visit the Real Time News Feed

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Retail Sales Ex Inflation (Q/Q) (2Q)

1.7%

1.5%

0.9%

0:30

AUD

Westpac Consumer Conf Index (AUG)

105.7

-

102.1

0:30

AUD

Westpac Consumer Confidence (AUG)

3.5%

-

-0.1%

1:30

AUD

Wage Cost Index (Y/Y) (2Q)

2.9%

3.0%

3.2%

1:30

AUD

Wage Cost Index (Q/Q) (2Q)

0.7%

0.7%

0.7%

3:00

NZD

Non Resident Bond Holdings (JUL)

67.9%

-

68.2%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:30

EUR

French GDP (Q/Q) (2Q P)

0.2%

-0.2%

Medium

5:30

EUR

French GDP (Y/Y) (2Q P)

-0.1%

-0.4%

Medium

6:00

EUR

German GDP w.d.a. (Y/Y) (2Q P)

0.2%

-0.2%

High

6:00

EUR

German GDP n.s.a. (Y/Y) (2Q P)

0.7%

-1.4%

High

6:00

EUR

German GDP s.a. (Q/Q) (2Q P)

0.6%

0.1%

High

7:15

CHF

Producer & Import Prices (Y/Y) (JUL)

0.5%

0.2%

Low

7:15

CHF

Producer & Import Prices (M/M) (JUL)

0.2%

0.1%

Low

8:30

GBP

Bank of England Minutes

-

-

High

8:30

GBP

Jobless Claims Change (JUL)

-15.0K

-21.2K

High

8:30

GBP

Claimant Count Rate (JUL)

4.4%

4.4%

Medium

8:30

GBP

Employment Change (3M/3M) (JUN)

34K

16K

Low

8:30

GBP

Average Weekly Earnings (3M/Y) (JUN)

2.0%

1.7%

Low

8:30

GBP

Weekly Earnings ex Bonus (3M/Y) (JUN)

1.1%

1.0%

Low

8:30

GBP

ILO Unemployment Rate (3M) (JUN)

7.8%

7.8%

Medium

9:00

CHF

ZEW Survey (Expectations) (AUG)

-

4.8

Medium

9:00

EUR

Euro-Zone GDP s.a. (Q/Q) (2Q A)

0.2%

-0.3%

High

9:00

EUR

Euro-Zone GDP s.a. (Y/Y) (2Q A)

-0.8%

-1.1%

High

Critical Levels:

CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3105

1.3188

1.3226

1.3271

1.3309

1.3354

1.3437

GBPUSD

1.5293

1.5378

1.5413

1.5463

1.5498

1.5548

1.5633

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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