Dollar and GBP surge on strong data prints

This week saw the GBP gain sharply on expectations of a December rate hike for the Bank of England. With UK inflation surging higher and employment showing strength the two boxes that the Bank of England needed ticking for a hike have been fulfilled. Will we see the GBPCAD rally higher into next week now? Midweek the US retail sales print rose for the third month in a row and this blew away any consumer fears raised by the poor University of Michigan sentiment reading from last Friday. USDJPY rose sharply on the release. However, it can be argued that the USD rise looks overdone as the Fed is still maintaining its ‘patient’ stance before hiking rates.

Other key events from the past week

• GBP: Inflation, Nov 17: This week's inflation print came in at 4.2% y/y vs 3.9% expected. This took EURGBP to its lowest level since last year as expectations rose for the Bank of England to hike interest rates in December.

• USD: Retail sales, Nov 16: US retail sales rose by 1.5% m/m in October as US retail sales printed gains for the third month in a row. In line with Industrial Production increasing the dollar was lifted in expectations of the Fed hiking rates. However, will the USD strength last since the Fed is expected to be patient?

• GBP: Employment print, Nov 16: The BoE had held back from hiking rates at their last meeting due to labour worries. However, the strong labor data this week showing 247K jobs added, with a 4.3% unemployment figure, opens the door to a December hike. More GBP gains ahead?

Key events for the coming week

• NZD: Interest Rate Hike? Nov 24: Will the RBNZ respond to their rising inflation and strong jobs market with a 50bps rate hike next week? Watch out for a potential buy the rumour sell the fact response like there was last time.

• Seasonal trades: Netflix, November 22: Netflix has some very strong seasonals from November 22 through to the end of February. The pattern has over a 233.17% annualized return! Will this strong seasonal pattern repeat again this year? 

• USD: Thanksgiving Holiday, Nov 25: The US is on holiday next week for Thanksgiving, so expect lower volatility as we head into the weekend. Remember that lower liquidity can either mean very quiet markets or markets that move large amounts should any significant news break.

---

Learn more about HYCM