GBP/USD Fundamental Analysis August 16, 2012, Forecast

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Analysis and Recommendations:

The GBP/USD is trading even this afternoon, after positive eco data supported the GBP. The pair are trading at 1.5675. The UK jobs market posted modestly encouraging results in July, with jobless claims falling by close to 6k. The UK’s employment numbers (as opposed to jobless claim data) lag by a month, however we’ve seen good progress there as well, with employment up by 201k in the three months through June vs. the three months through March. Is it the Olympics?

Despite the fact that all the MPC members voted to leave the current monetary policy unchanged, many market participants still believe the BoE will opt for more monetary easing in the coming months to aid an economy struggling in a deep recession.

The BoE believes that it has cut its overnight interest rate beyond the point at which marginal rate cuts could be expected to spur further lending growth (the normal ‘transmission mechanism’ between central bank rate cuts and the real economy), and its Monetary Policy Committee voted 9-0 not to cut its benchmark rate further. It has engaged in an aggressive expansion of its balance sheet, and the effects of further QE for the real economy are at least questionable (perhaps that’s why the MPC voted 9-0 not to add to its asset purchase program again after having just done so anyway). To side-step the problem of the dwindling effectiveness of both QE and rate cuts, the BoE has been compelled to get creative, recently initiating the Funding for Lending Scheme designed to spur bank loans through direct subsidy. As central banks globally continue to grapple with the challenges of operating monetary policy at or at least close to what Fed Chairman Ben Bernanke dubbed the “zero bound” (i.e. a policy rate at or similar to an interest rate of zero), expect them to continue to innovate, or as the BoE put it in its recent minutes, to consider “other policy options.”

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data August 15, 2012 actual v. forecast

 

 

Currency

 

 

 

Event 

actual

 

forecast

 

previous

   

Aug. 15

 

AUD

 

 

 

Westpac Consumer Sentiment 

-2.50%

 

 

 

3.70% 

 

 

 

 

AUD

 

 

 

Wage Price Index (QoQ) 

1.0%

 

0.8% 

 

0.9% 

 

 

 

 

TRY

 

 

 

Turkish Quarterly Unemployment Rate 

8.20%

 

8.90% 

 

9.00% 

 

 

 

 

GBP

 

 

 

Average Earnings Index +Bonus 

1.6%

 

1.8% 

 

1.5% 

 

 

 

 

GBP

 

 

 

Claimant Count Change 

-5.9K

 

6.0K 

 

1.0K 

   

 

 

GBP

 

 

 

MPC Meeting Minutes 

 

 

 

 

 

 

 

 

 

USD

 

 

 

Core CPI (MoM) 

0.1%

 

0.2% 

 

0.2% 

 

 

 

 

USD

 

 

 

CPI (MoM) 

0.0%

 

0.2% 

 

0.0% 

 

 

 

 

USD

 

 

 

NY Empire State Manufacturing Index 

-5.8

 

6.5 

 

7.4 

 

 

 

 

USD

 

 

 

CPI (YoY) 

1.4%

 

1.6% 

 

1.7% 

 

 

 

 

USD

 

 

 

Core CPI (YoY) 

2.1%

 

2.2% 

 

2.2% 

 

 

 

 

USD

 

 

 

TIC Net Long-Term Transactions 

9.3B

 

63.0B 

 

55.9B 

   

 

 

USD

 

 

 

Industrial Production (MoM) 

0.6%

 

0.5% 

 

0.1% 

   

 

Upcoming Economic Events that affect the CHF, EUR, GBP and USD

Date

Time

Currency

Event  

Forecast

Previous

Aug 16

9:00

CHF

ZEW Economic Expectations

 

-42.5

 

9:00

EUR

CPI y/y

2.4%

2.4%

 

12:30

USD

Building Permits

0.77M

0.76M

 

12:30

USD

Unemployment Claims

365K

361K

 

12:30

USD

Housing Starts

0.76M

0.76M

 

14:00

USD

Philly Fed Manufacturing Index

-4.3

-12.9

Aug 17

6:00

EUR

German PPI m/m

0.4%

-0.4%

 

8:00

EUR

Current Account

7.8B

10.9B

 

13:55

USD

Prelim UoM Consumer Sentiment

72.5

72.3

Government Bond Auctions

Date  Time  Country 

Aug 16  09:30  UK

Aug 16  15:00  US 

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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