GBP/USD Fundamental Analysis – for the week of August 22, 2016 -Forecast

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Published: Aug 20, 2016, 07:01 UTC

The GBP/USD ended the week at 1.3074 seeing a gain of more than 1% after better than expected retail data and other less reports also showed that Brexit

GBP/USD Fundamental Analysis – for the week of August 22, 2016 -Forecast

The GBP/USD ended the week at 1.3074 seeing a gain of more than 1% after better than expected retail data and other less reports also showed that Brexit had not had the negative effects predicted by many analysts. The pound is down 11.29% on a year to date basis. The Bank of England started launched its bond buying program this past week.

Sterling was among the Friday’s biggest decliners against the US currency as rumors swirled through the markets that Theresa May, UK prime minister, could invoke Article 50 — the clause that will begin formal EU exit negotiations — as early as next April.

While reports in the UK media recently suggested May could wait until the end of 2017 before opening two years of negotiations through triggering Article 50, she is sympathetic to the case for acting by April at the latest as Germany and France prepare for elections and pro-Brexit campaigners at home warn against delay, said the official sources.

The pound had its worst-ever day against the US currency when the result became clear a day later, while losses deepened after the Bank of England’s decision this month to cut interest rates by a quarter-point and boost its stimulus plan.

The Bank of England will draw some comfort from signs that the UK economy weathered the initial shock of the Brexit vote. However, its concern that prompted its huge stimulus plan is unlikely to have lessened.

The first official data covering the post-referendum period, published during the week, had shown no immediate big hit to the UK economy as retail sales surged in July and claims for unemployment benefits fell.

But for the Bank of England’s policymakers who surprised investors with a “sledgehammer” stimulus plan this month, the early readings of the economy offer only a narrow snapshot compared with the years of economic uncertainty they see facing the UK as it reworks its relationship with its main trading partners in the EU.

“(The) retail sales data tell us next to nothing about the health of the UK economy after the Brexit vote,” Andrew Brigden, chief economist at Fathom Consulting, said.

By contrast, Tuesday’s inflation data offered a sign of the challenge to come for Britain’s consumers who drove the country’s economic recovery over the past three years.

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Week of August 22-25, 2016

Date	Country	Name	Volatility	Previous
8/23/2016	GBP	Inflation Report	3
8/24/2016	EUR	GDP w.d.a (YoY)	3	1.8
8/24/2016	EUR	GBP s.a (QoQ)	3	0.4
8/24/2016	EUR	GDP n.s.a (YoY)	3	3.1