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GBP/USD Fundamental Forecast – August 23. 2016

By:
Barry Norman
Published: Aug 22, 2016, 11:29 UTC

The GBP/USD added 13 points as traders seem relaxed with Theresa May’s handling of the Brexit negotiations and the release of better than expected data

GBP/USD Fundamental Forecast – August 23. 2016

The GBP/USD added 13 points as traders seem relaxed with Theresa May’s handling of the Brexit negotiations and the release of better than expected data last week. The pound is trading at 1.3089. Investors were cautious on Monday as they look ahead to US Federal Reserve Chair Janet Yellen’s speech at Jackson Hole later this week. Yellen is due to speak at the Wyoming event on Friday and market participants will be keen to hear if she delivers any indications about the timing of the next US rate hike, after comments from several Fed officials last week.

“It’s all about the Federal Reserve at the start of this week, as markets continue to grapple with comments from various Fed rate setters on when interest rates will next be raised,” said Joshua Mahoney, an analyst at IG Markets.

“On Sunday, it was the turn of [Fed vice-president] Stanley Fischer who said US core inflation was closing in on the central bank’s 2% target. That’s given the dollar strength Monday morning, and commodity prices are down as a result,” noted Mahoney. The greenback was recovering some of the ground it lost last week against other major currencies, after declining on Wednesday after a dovish set of minutes from the Fed.

The pound was recovering after taking a hit on Friday, following a report from Bloomberg stating that UK Prime Minister Theresa May’s team was still leaning towards the first part of 2017 as the best moment to trigger formal talks over the UK’s withdrawal from the European Union.

Reuters subsequently reported that May will not begin the formal talks before the end of the year, according to a government spokeswoman. “We don’t recognize this briefing,” the spokeswoman said when asked about the Bloomberg article. The UK currency stood at compared to USD1.3068 at the equities close on Friday.

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Upcoming Economic Events that you should be monitoring:

August 23, 2016

Country Name Volatility Previous
GBP Inflation Report Hearings 3
USD Durable Goods Orders CORE 2 -0.5
USD Durable Goods Orders 2 -4
USD New Home Sales (MoM) 2 0.592
USD New Home Sales Change (MoM) 2 3.5

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Date Time Country Auction

Aug 24 10:03 Sweden Holds bond auction

Aug 24 10:30 Germany Eur 4bn 0% Oct 2021 Bobl

Aug 24 18:00 US Holds 2yr FRN auction & 5yr note auction

Aug 25 18:00 US Holds 7yr note auction

Aug 26 10:10 Italy Holds zero coupon

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