15 Apr 2014
Weaker inflation may pressure down the Sterling - RBS
FXStreet (Bali) - Greg Gibbs, FX Trading Strategist at RBS, shared his view on the GBP for Tuesday, noting that weaker inflation may put downward pressure on the Sterling.
Key Quotes
"Inflation indicators move into focus. Softer retail sales and potential for weaker inflation may weaken the GBP."
"UK retail sales reported by the BRC were -1.7%y/y for same-store sales in March, slowing for a second month, and significantly below +1.0% y/y expected (realised this morning in Asia). However, there appears to be a lot of seasonal distortion in this data at this time of year, and the recent falls follow a surge in January."
"On a three-month moving average basis, same-store sales rose 0.5%y/y. This was still the weakest outcome since June 2013. Total sales rose 2.1% 3mth-y/y, also the slowest since June 2013. The data suggest some peaking in the pace of retail sales and may weigh on GBP somewhat."
"In our Sterling weekly report, my FX Strategy colleague in London, Paul Robson, reports that tonight's CPI may show price growth slipping more than expected in March (to 1.5% from 1.7% the previous month and a consensus 1.6%). This may put some downward pressure on UK yields and the GBP."
"On the other hand, the employment report (Wednesday) may show unemployment tick lower again after it lifted a tick and stabilized at 7.2% in Dec/Jan from its low of 7.1% in Nov (3mth average data)."
"Perhaps more important will be the pace of wage growth and this is expected to pick up to 1.8%y/y from 1.4%y/y previously, although this will still be a significant margin below the BoE expectation for it to rise to 2.75% by year-end and pre-2008 crisis growth over 4%."
"Employment growth is expected to moderate further from its record growth rate in Q4 to a still solid 90K 3m/3m pace. RBS forecasts for unemployment, wages and job growth are in line with the market consensus."
Key Quotes
"Inflation indicators move into focus. Softer retail sales and potential for weaker inflation may weaken the GBP."
"UK retail sales reported by the BRC were -1.7%y/y for same-store sales in March, slowing for a second month, and significantly below +1.0% y/y expected (realised this morning in Asia). However, there appears to be a lot of seasonal distortion in this data at this time of year, and the recent falls follow a surge in January."
"On a three-month moving average basis, same-store sales rose 0.5%y/y. This was still the weakest outcome since June 2013. Total sales rose 2.1% 3mth-y/y, also the slowest since June 2013. The data suggest some peaking in the pace of retail sales and may weigh on GBP somewhat."
"In our Sterling weekly report, my FX Strategy colleague in London, Paul Robson, reports that tonight's CPI may show price growth slipping more than expected in March (to 1.5% from 1.7% the previous month and a consensus 1.6%). This may put some downward pressure on UK yields and the GBP."
"On the other hand, the employment report (Wednesday) may show unemployment tick lower again after it lifted a tick and stabilized at 7.2% in Dec/Jan from its low of 7.1% in Nov (3mth average data)."
"Perhaps more important will be the pace of wage growth and this is expected to pick up to 1.8%y/y from 1.4%y/y previously, although this will still be a significant margin below the BoE expectation for it to rise to 2.75% by year-end and pre-2008 crisis growth over 4%."
"Employment growth is expected to moderate further from its record growth rate in Q4 to a still solid 90K 3m/3m pace. RBS forecasts for unemployment, wages and job growth are in line with the market consensus."