Pound Looks to Industrial Output Data to Drive BOE Policy Speculation

The British Pound is looking to May’s Industrial Production figures to help drive investors’ speculation about the timing of Bank of England interest rate hikes.

Talking Points:

• British Pound May Pull Back if Industrial Production Data Disappoints

• Euro Focused on ECB Commentary on Stimulus Expansion Speculation

• Australian Dollar Outperformed on Firming RBA Outlook in Asia Trade

UK Industrial Production figures headline a relatively quiet economic calendar in European hours. Output is expected to have added 3.2 percent year-on-year in May, making for the strongest outcome since January 2011. A firm outcome may feed speculation about a looming BOE interest rate hike, pushing the British Pound higher. UK economic data has broadly deteriorated relative to consensus forecasts since April however. That leaves the door open for a downside surprise as GBP/USD technical positioning reveals hints of a possible downswing ahead.

Scheduled remarks from ECB officials are in focus on the speaking schedule, with governing council member Luis Maria Linde and executive board member Christian Noyer due to cross the wires. The two policymakers’ remarks will be combed through for indications of progress on the central bank’s forthcoming ABS asset purchase effort.

Rhetoric hinting the ECB intends to activate the ABS program once it is ready would imply an expansion of stimulus is in train. Needless to say, such an outcome is likely to bode ill for the Euro. Alternatively, comments suggesting the ECB is developing the plan as added ammunition for its arsenal and may never actually use it (as has been the case with the OMT program) may offer a lift to the single currency.

The Australian Dollar narrowly outperformed in otherwise quiet overnight trade, rising as much as 0.2 percent on average against its leading counterparts. The move tracked an advance in Australia’s 2-year bond yield, suggesting the advance reflected firming RBA monetary policy bets. That was at least in part aided by a pickup in the Business Confidence, which rose to a five-month high in June according to data from NAB.

Critical Levels