Ralph Shell @ 1:50 PM, Tuesday April 20 2010
This will be a busy week for economic data from Britain which may provide some clues concerning the strength of the current recovery, and also the second debate prior to the forthcoming election on May 6th. Not too many months ago, the British Gov was touting quantitative easing as a remedy for dreaded deflation. This morning they reported the y/y CPI Index was up 3.4%, versus an expected 3.2% and 3.0% in the previous period. So much for deflation. This is the fourth month in a row that the CPI has exceeded the Bank Of England's 2% target.
On Wednesday we get the MPC Meeting Minutes and the Claimants for a job seeker's allowance is expected to be -7.2k tomorrow. Today in the guardian.co.uk, The Observer, they reported:
"The financial crisis has thrown every region of the UK back to the
jobless levels of 1999, wiping out the entire benefit of a decade of
economic "boom", research for the
Observer has revealed.
The
number of claimants for jobseeker's allowance (JSA)
has doubled in most areas from the low points achieved in the mid-2000s,
showing how the "bankers' recession" has spread inexorably across
the country, contrary to earlier hopes that job losses could be contained within
the City and financial services."
What can be done about the current unemployment plight will liven the second debate this week. The Timesonline reported this morning that four recent polls showed the Conservatives had 32-33% preference , 28-31% for the Liberal Democrats and Labour 26-28%.
Prior to the Thursday debate we will a report of the public sector net borrowing, expected to be £24.2B versus £12.4 a year ago. and we get retail sales expected to be up 0.7%. On Friday we wind up the week with a preliminary GDP number expected to be up 0.4% plus, of course, the pundits assessment of the debate.
With so much data to digest and a chance for the world to watch democracy evolving there should be some further volatility in the pound this week. Monday's gap lower was quickly filled by today's reversal which carried up to 1.5430, then followed by a sell off to the 1.5350 area. We are currently resting in the middle of the recent 1.52 to 1.55 range. The COT reports show the specs, large and small favor the short side of the pound. In the latest reporting period, there was a modest reduction in short positions but the large spec is still a 5 to 1 short. Fading the extremes of this range seems like a plan, although we are wary what might make shorts cover. On the other hand, the resurgence of the Lib Dems is adding a new ingredient to the Brit's political stew, making the final product uncertain and a hung parliament more likely.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.