FX Week Ahead: US Inflation; BOC & ECB Rate Decisions; UK GDP; Canada Jobs

03/12 FRIDAY | 07:00 GMT | GBP GROWTH RATE (JAN)

While the UK is among the best in the world at vaccinating its citizens, such a designation became a necessity after the outbreak of the B1.1.7 mutation of COVID-19. The emergence of the mutation lead to lockdowns at the end of 2020 which rolled into 2021, keeping the economy on simmer rather than back on the path towards a rolling boil.

According to a Bloomberg News survey, the three-month growth rate through January 2021 is due in at -2.4% from +1% in December 2020. Meanwhile, the year-over-year reading is due in at -10.9% in January from -6.5% in December. Like last month, any issues seen in the January 2021 UK GDP data may be overlooked as “more near-term information paints a brighter future.”

IG CLIENT SENTIMENT INDEX: GBP/USD RATE FORECAST (MARCH 5, 2021) (CHART 2)

FX Week Ahead - Top 5 Events: US Inflation; BOC & ECB Rate Decisions; UK GDP; Canada Jobs

GBP/USD: Retail trader data shows 54.12% of traders are net-long with the ratio of traders long to short at 1.18 to 1. The number of traders net-long is 1.05% higher than yesterday and 10.18% higher from last week, while the number of traders net-short is 12.90% lower than yesterday and 12.67% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.

03/12 FRIDAY | 13:30 GMT | CAD EMPLOYMENT CHANGE & UNEMPLOYMENT RATE (FEB)

After a harrowing reading of -212.8K in January, the Canadian labor market is looking for a relatively modest expansion in February. Bloomberg News consensus forecasts call for the February Canada jobs report to show that the economy added +52.5K jobs. The unemployment rate is expected to fall back to 9.3% from 9.4%, after sharply moving off of the November 2020 low of 8.5%. A better reading of the Canadian labor report alongside further strength in energy prices may allow for the Loonie to regain its footing by the end of the week.

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