The Top 3 Events For Forex Markets To Watch in The Week Ahead

1. GBP: Brexit Bill Votes

Given the huge 10-15% estimated Brexit premium weighing on the Pound from fears the UK could crash out of the EU with no deal, the progress of the government's Chequer's 'softer-Brexit' plan through the House of Commons next week will be crucial.

Parlimentarians will get a chance to vote on the new plan and the government still needs to win support for their "Trade and Customs Bills" in key votes expected to take place on Monday 16th and Tuesday 17th of July.

"Another legislative showdown takes place in the UK House of Commons as the Trade and Customs Bills are voted on. Amendments to the bill have come from hard Brexiters (trying to undo the white paper) and Remainers (trying to bind the UK to a customs union). Some of these votes could come down to the wire, and have significant implications for Brexit negotiations," says Actionforex.com.

In the event the government fails to garner enough support for their Chequer's plan the default position reverts to no-deal and Sterling is likely to sell-off heavily.

Sterling may catch a bid if Brexit supporters in the Conservative party fail in their upcoming attempt to harden the UK government's plan on leaving the EU, as failure should increase the GBP-positive probability of a relatively soft Brexit.

Indeed, Theresa May has penned a piece for the Mail on Sunday saying that her party should keep their "eyes on the prize" and stick with her to deliver Brexit.

We note a string of opinion polls out over recent days that shows support for the Convervatives has fallen below that of Labour with a good proportion of voters flocking back to UKIP having judged that May will not deliver the Brexit they desire.

This will remind Convervative lawmakers that bringing down the government will likely throw their party onto the opposition benches. It does also however offer the potential to sharpen the determination of Brexiteers who believe their electoral success will lie with delivering a clean 'hard' Brexit.

The problem is that positions are so polarised. On the far side are hard Brexiteers who don't like the Chequers accord because it keeps the UK de facto in the common market. On the other extreme is the EU which wants to defend its principle of freedom of movement. In the middle is Theresa May.   

2. USD: US Fed Chairman Powell Testifies to Congression Economic Committee

On Tuesday at 14.00 GMT Fed Chairman Powell will be presenting himself to Congress for one of the Fed Chairman's less pleasant jobs, the semi-annual grilling from congressional policymakers.

He will have much to explain as politicians will probably want to understand the potential impact of Trump's aggressive approach to diplomacy and tariffs, and his stimulative tax cuts.

So far they appear to be driving growth and the US Dollar higher. It is possible Powell may say the Fed is adjusting its stance in light of the changes - meaning it could be entertaining a more aggressive approach to policy and higher interest rates.

If so that will continuing fueling the Dollar's rise as higher rates are supportive due to their attartciong to foreign investors who tend to prefer to place their capital in jurisdictions where they are going to earn higher returns.

Of course, alternatively, Powell may decide to focus on the downside risks of the current trade war on US growth and this would push the Dollar down instead.

"A bigger risk for the greenback is likely to be Fed Chairman Jerome Powell’s testimony before Congress on Tuesday, where he will give his latest monetary policy assessment to US lawmakers. Investors will be watching if the Fed is becoming concerned about overshooting its inflation target and whether the central bank is worried about the impact of the escalating trade tensions on the US economy," says a note on the matter from Actionforex.

Of Powell's testimony, analysts at global investment bank TD Securities epect him to reiterate the Fed's standard line about 'gradual growth'.

"We expect him to reiterate the case for gradual hikes on the back of a tight labor market but contained inflation. We focus on any comments on trade protectionism and the yield curve along with operational procedures," say TD Securities.

3. GBP: Various Major Data Releases

The week ahead is set to be especially busy for Sterling from a pure data perspective.

Not only are there three exceptionally important releases: labour market on Tuesday, CPI on Wednesday and retail sales on Thursday (all at 8.30 GMT), but these will be the last major releases before the Bank of England (BOE) meets to decide whether to raise interest rates at their August meeting.

The August meeting is live, meaning analysts think there is a chance the BOE will go ahead and raise interest rates. The probabilities are evenly balanced, however, so next week's data could prove critical in swinging decision-making which could lead to very different outcomes on wafer-thin differences.

As far as the individual releases go, labour market data is expected to show continued improvement although the more important wage data, which impacts more on BOE decision-making, is expected to show only modest rises of 2.6% and 2.8% (including bonuses) in May. Strong wage rises are necessary for a rate hike.
CPI is more likely to show a rise but analysts put this down to the temporary influence of higher oil prices.

"We suspect that CPI inflation edged up to 2.6% in June, owing to a rise in energy prices. But this should not mark the start of a sustained rise," says Andrew Wishart, UK economist at Capital Economics.

On the subject of retail sales, Wishart is less bullish, seeing "mixed evidence" for a rise in June.

"The evidence on the strength of retail sales in June has been decidedly mixed," says the economist.

Whilst April and May's results were strong and suggest the possibility of a pull-back in June, and the BRC data was poor, other factors such as the weather and the world cup could support a rise."
Other's are more upbeat still:

"More sunshine, warm weather, and World Cup should be supportive. Our base case 0.4% forecast leaves a very strong trend for Q2 sales, and a solid hand-off to Q3," says TD securities.

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