A relatively mild calendar on the data front led to a stabilization on the markets last week and it was dominated by politics again. No one other than Donald Trump himself moved the markets with a promise to announce a frame for a long awaited tax reform within two to three weeks. That gave the US dollar a much needed boost and pushed US indices to fresh all time highs. The US dollar will remain in the spotlight this week with heavyweight events like Yellen’s testimony and inflation data both scheduled for Wednesday. A streak of macroeconomic data will be released in the UK as well and we could see significant moves on GBPUSD.
Yellen’s testimony: Wednesday (3:00 pm GMT)
The U.S. economy has been performing well in the first quarter of the new year, but the US dollar has been struggling. That’s because the focus has shifted from the monetary policy to Donald Trump’s reforms. The market is pricing less than two rate hikes this year, which means that an optimistic tone of Yellen’s speech could be US dollar positive and gold negative.
US data: CPI and retail sales (Wednesday, 1:30 pm GMT)
Wednesday is set to be the most important day of the upcoming week. It won’t be only because of Yellen, but also due to the crucial data from the US economy. Retail sales has been solid in recent months and consumer spending has had a solid contribution to the economic growth. Further gains in consumer optimism as well as a solid NFP report may herald another positive print. If it’s accompanied by another rise in inflation, another rate hike from the FED will be closer.
UK data: CPI (Tuesday, 9:30 am GMT), Employment data (Wednesday, 9:30am GMT), Retail Sales (Thursday, 9:30 am GMT)
Although the moves of the UK pound are dictated mainly by the Brexit stories, the data from the real economy shouldn’t be ignored. The Bank of England has upgraded it’s economic projections recently and additional easing shouldn’t be expected. The pound got also a boost from Theresa May, who said that the UK would seek trade agreements with the European Union. Another streak of solid data could support the pound even if it’s Brexit that remains in the driver’s seat in this market.