By FX Empire.com

The GBP/USD retreated for the second week as the undergoing tensions stemming from the euro area enhanced demand on the dollar as a refuge.

The pair was affected by the general sentiment which was fueled with fears amid political instability and financial turbulences in Greece and Italy as well as weak fundamentals from the U.K.

Italian bond yields rose to the highest level since the birth of the euro in 1999 after Prime Minister Silvio Berlusconi said he will step down after the approval of austerity measures needed to cut the country’s huge budget shortfall, where concerns eased to some extent after the formation of an interim government became very close as former European commissioner Mario Monti emerged as a new leader for this government.

In Greece, default nightmare remained predominant till the appointment to Lucas Papandemos, a former ECB vice-president, to lead a new crisis coalition government.

Moreover, fundamentals from the U.K. showed that goods trade deficit widened to 9814 million pounds in Sep. from the revised 8617 million pounds in August. The Confederation of British Industry (CBI) lowered growth projections for the U.K. to 0.9% and 1.2% this year and next from the prior forecasts of 1.3% and 2.2%, where it also cut growth forecasts for the euro area and global economies.

This week, the U.K. will release a batch of important data where main focus will be on the inflation data, particularly annual CPI for Oct. Also, unemployment and retail sales reports are going to be closely watched by investors as the spending cuts by the government along with the rise in inflation are expected to have negative impact on the economy. However, the main highlight will be probably on the latest growth and inflation forecasts due this week in November’s quarterly inflation report, while in the U.S., the main focus will be on housing and inflation data.

The release of the data this week will be as follows:

Monday Nov 14:

Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.

Tuesday Nov 15:

CPI and RPI data will grab attention at 09:30 GMT where expectations refer to decline in CPI annual reading for Oct. to 5.1% from the prior 5.2%. The data is predicted to have an impact on the pair if it came much higher or lower than forecasts.

For the US, the main focus will also be on inflation data with the release of PPI at 13:30 GMT, where the annual reading excluding food and energy will rise to 2.9% from 2.5%, according to median forecasts. At the same time, retail sales less and empire manufacturing will be available.

Wednesday Nov 16:

Unemployment data from the British economy will be out at 09:30 GMT, where ILO unemployment for the three months ended Sep. will rise to 8.2% from 8.1% while jobless claims will incline to 23.5 thousands in Oct. from 17.5 thousands a month earlier, whereas the awaited inflation report will be available at 10:30 GMT.

U.S. MBA mortgage applications for Nov. 11 will be available at 11:00 GMT. As of 13:30 GMT, CPI for the year ended Oct. is estimated to retreat to 3.6% from 3.9%. Thereafter, net long-term TIC flows and industrial production will be due at 14:00 GMT and 14:15 GMT respectively.

Thursday Nov 17:

At 08:30 GMT, the UK will release retail sales for Oct.; analysts are predicting a decline of 0.2% in the reading with auto fuel from the 0.6% advance recorded a month earlier.

For the US, eyes will be on a batch of US data including housing data with the release housing starts and building permits for Oct. at 13:30 GMT as it will provide evidence about the status of the housing market that triggered the 2008 crisis. Housing starts are predicted to retreat to 610,000 from 658,000 a month earlier, while building permits is set to soar to 600,000 from 594,000. At the same time the US, initial jobless claims for the week ending Nov. 11 and continuing claims for the week ended Nov. 4 will be available. Thereafter, particularly at 15:00 GMT, Philadelphia Fed will be out.

Friday Nov 18:

The weekends with the release of no data from the U.K. while the U.S. will release leading indicators which may show a rise to 0.5% in the month of Oct. from the prior reading of 0.2%.

Originally posted here