GBP/USD Fundamental Forecast – February 10, 2016

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Published: Feb 9, 2016, 13:16 UTC

Analysis and Recommendations: The GBP/USD is trading at 1.4434 up by 2 points after a positive trade balance report. Comments from BoE MPC member Cunliffe

GBP/USD Fundamental Forecast – February 10, 2016

Analysis and Recommendations:

The GBP/USD is trading at 1.4434 up by 2 points after a positive trade balance report. Comments from BoE MPC member Cunliffe is weighing on the pound as well as headlines referring to Brexit. The Office for National Statistics said Britain’s total trade deficit widened to 10.352 billion pounds in the fourth quarter from 8.575 billion pounds in the previous quarter, marking the biggest trade gap since the start of 2015.

Trade will likely appear as a drag on economic growth at the end of last year when revised figures for gross domestic product are released, the ONS said.

The trade in goods deficit for 2015 as a whole widened to 125.028 billion pounds from 123.143 billion pounds, the biggest on record.

In December alone, the total trade deficit, including services, narrowed to 2.709 billion pounds from 4.031 billion pounds, helped by the value of oil imports falling to their lowest since February 2009 as crude prices plunge.

Brent crude oil prices slid 16 percent in December and 35 percent for 2015 as a whole, helping Britain’s trade balance as it is now a net oil importer after declines in North Sea fields. The deficit in goods alone narrowed to 9.917 billion pounds from 11.503 billion pounds, compared with economists’ forecasts for a smaller fall to 10.4 billion pounds.

The narrowing is attributed to trade in goods where the deficit has narrowed from £11.5 billion in November 2015, to £9.9 billion in December 2015.

The total value of trade, and the UK’s stubborn trade deficit, remained broadly flat last year. This is unsurprising given the sharp fall in the price of oil, which knocked British exports and made imports a little cheaper for British customers.

Since the fall in the oil price should still be a net win for the UK economy, we should not be disproportionately concerned about the adverse effect this has on areas like our trade balance.

Nevertheless, we cannot write off concerns about Britain’s export performance over the longer-term. Meeting the government’s ambitious target of £1 trillion worth of overseas sales by 2020 will be a monumental challenge.

FxEmpire provides in-depth analysis for each asset 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, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Cur.	Event	Actual	Forecast	Previous
	China – Lunar New Year
GBP	BRC Retail Sales Monitor (YoY) (Jan)	2.6%	0.4%	0.1%
AUD	NAB Business Confidence (Jan)	2	2	3
EUR	German Industrial Production (MoM)	-1.2%	0.4%	-0.1%
EUR	German Trade Balance (Dec)	18.8B	20.2B	20.5B
GBP	BoE MPC Member Cunliffe Speaks
GBP	Trade Balance (Dec)	-9.92B	-10.40B	-11.50B
GBP	Trade Balance Non-EU (Dec)	-2.36B	-2.60B	-3.54B

Upcoming Economic Events that you should be monitoring:

Wednesday, February 10, 2016

Cur.	Event	Actual	Forecast	Previous
	China – Lunar New Year
USD	API Weekly Crude Oil Stock			3.837M
NZD	Electronic Card Retail Sales (MoM)		0.3%	-0.2%
AUD	Westpac Consumer Sentiment		-1.0%	-3.5%
AUD	HIA New Home Sales (MoM) (Dec)			-2.7%
GBP	Industrial Production (MoM) (Dec)		-0.1%	-0.7%
GBP	Manufacturing Production (MoM)		0.1%	-0.4%
GBP	NIESR GDP Estimate			0.6%
USD	Fed Chair Yellen Testifies
USD	Crude Oil Inventories		3.933M	7.792M
USD	FOMC Member Williams Speaks
USD	Federal Budget Balance (Jan)		45.0B	-14.0B