FX.co ★ Weekly review of the GBP / USD on 05/07/2018

The pound has been losing its positions for three weeks in a row. Last week, the reason for this was both British statistics and the US data were disappointing. In particular, the volume of consumer lending in the UK amounted to 0.3 billion pounds against 1.7 billion pounds in the previous month. Moreover, the number of approved applications for mortgages decreased from 63 781 to 62 914. Such poor data on the credit market clearly did not favor the growth of the pound.

In turn, the US statistics was much better. In particular, personal income and expenses increased by 0.3% and 0.4% respectively. After several months in a row, incomes grew faster than expenditures. Because of this, many began to fear an inevitable decline in consumer activity and, as a consequence, a reduction in inflation. Now these fears have receded into the background. The unemployment rate decreased from 4.1% to 3.9%. This happened not only due to the fact that 164 thousand new jobs were created outside agriculture, but also because of the decrease in the labor force's share in the total population from 62.9% to 62.8%.The growth rate of the average hourly wage remained unchanged. Although, against the background of a decrease in the unemployment rate, this is not so important.

The meeting of the Federal Commission for Open Market Operations became an absolutely passing event. However, it is worth acknowledging that this was exactly what the market participants were waiting for. No surprises happened, and the regulator did not receive new introductory notes.

The central event will be a meeting of the Bank of England on monetary policy, during which, it is expected that the refinancing rate will increase from 0.5% to 0.75%. Given the excessive overselling of the pound, this will be an excellent reason to start correction. Moreover, given the weight of the pound in the dollar index, its growth will provoke a widespread weakening of the dollar. Even the growth of inflation in the US from 2.4% to 2.5% can not change the course of events, as the correction in the dollar has long been ripe, and the market needs only an excuse. In addition, inflation growth is not able to exert any significant influence, since it is not able to influence the Fed's plans on the rate of increase in the refinancing rate.

The likelihood of a serious increase in the pound will begin on Thursday, and by the end of the week, it will rise to 1.3775.