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British Pound Tied Up in Risk Ahead of the Advanced 2Q GDP Numbers

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As GBPUSD can attest to, the British pound was little moved against most of its major counterparts this past week. This is tranquility was somewhat unexpected considering the presence of the Bank of England’s rate decision and the G8 meeting. Both events seem to have had little immediate impact on the sterling; but be sure, they have had their influence on the fundamental currents underlying the price action.

Looking at the economic docket, it seems relatively light on market movers; but there is certainly fuel in the few indicators that populate the calendar. It is clear from a quick scan of the listing that event risk is heavily loaded to the front half of the week; and the last round of data due Wednesday is arguably the most influential.Employment is a critical factor in the United Kingdom’s eventual recovery from its worst recession since WWII. Market commentators often point to a rebound in credit activity and turn around in the housing sector as key steps to facilitating a broader economic recovery. However, both of these dynamics are dependent upon the health of the consumer. Brits require the means and confidence to put their money back into the economy and financial system. Employment is critical to both nationwide wealth and sentiment; yet the trend is hardly the beacon for a recovery that many seem so sure is under way. Through May, unemployment levels hit their highest levels since 1996. And, looking at forecasts for jobless claims, the this demographic is expected to grow. Another 40,000-plus contraction in payrolls would mark the 16th consecutive monthly contraction and no doubt push the 7.2 percent unemployment rate measured over the quarter through April higher.Full Articles

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