Data dump could mean busy week for pound

The markets will be treated to a data dump this week out the UK, which could mean a busy week for the British pound. The UK releases employment data on Tuesday, inflation on Wednesday and retail sales on Friday. Currently, GBP/USD is trading at 1.3440, up 0.17% on the day. It has been a rough stretch for the British pound, which hasn’t mustered a winning week in a month. The pound fell to 1.3354 on Friday, marking an 11-month low.

BoE Bailey defends non-move

BoE Governor Andrew Bailey testified before a parliamentary committee earlier on Monday. Predictably, Bailey was questioned about the BoE’s decision not to raise rates at the November meeting. Bailey’s responses didn’t add anything that the markets haven’t already heard. Bailey repeated that the decision was a very close call, which sounds like damage control after the pound took a beating after the decision. As well, Bailey told lawmakers that the BoE had never said it would raise rates in November. That may be true, but the markets had an extreme reaction precisely because Bailey had strongly signalled that the bank would raise rates in order to contain inflation.

This week’s releases, starting with employment data on Tuesday, could play a critical role as to whether the BoE decides to raise rates at the December meeting.

In the US, inflation shows no signs of slowing down, and the Fed’s message that inflation is transitory is looking more out of sync with the inflation data. October inflation numbers were red hot, with headline CPI rising to 6.2% y/y and CPI climbing to 4.6%, as both reads were the fastest pace seen since the early 1990s. A key question is how long can the Fed continue to ignore the inflation data and not take action.

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GBP/USD Technical Analysis

• There is support at 1.3310. Below, there is support at 1.3206
• There is resistance at 1.3562 and 1.3710

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