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GBP/USD Fundamental Forecast – February 12, 2016

By:
Barry Norman
Published: Feb 11, 2016, 12:36 UTC

Analysis and Recommendations: The GBP/USD tumbled 65 points to 1.4459 against the weak dollar as traders looked at a disappointing RICS house price

GBP/USD Fundamental Forecast – February 12, 2016

gbpusd thursday bns
Analysis and Recommendations:

The GBP/USD tumbled 65 points to 1.4459 against the weak dollar as traders looked at a disappointing RICS house price balance and also moved out of currencies. Brexit is becoming a thorn in the side for risk traders.

Global oil prices have played a significant part in price action for the world’s major currency pairs since Christmas and this situation is forecast to continue in the short to medium term as the world’s oil producing nations keep up the current rate of over-production despite growing rumors that OPEC might meet to discuss cutting production. Our leading analyst explores the reasons why this is the case below.

The primary driver for the relative value of currencies since the industrial revolution has been the currency in question’s relative yield. Put quite simply, investors are invariably more willing to park their funds in currency zones with higher interest rates than those with a lower rate of return. Each currency is backed by a central bank which determines that currency zone’s individual interest rate, and the single most significant factor in helping each respective central bank set policy is the local rate of inflation.

On the economic front, the Governor of the Bank of England (BOE) Mark Carney has played a central role in affecting currency movements. In the summer, he signalled that the decision to raise interest rates which have been on hold at historic lows since March 2009, might come into focus “around the turn of the year”. With the market widely anticipating the start of tighter monetary policy in Britain similar to the US, sterling reversed its downward trend and strengthened once again until mid-November.

However, the Governor of the BOE backtracked somewhat over recent months as plunging oil prices and slowing global growth stemming from a deteriorating Chinese economy are weighing on inflation expectations across the UK. This began to lead to a decline in the value of sterling.

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  
    Japan – National Founding Day
    China – Lunar New Year
  NZD Business NZ PMI (Jan) 57.9   56.7  
  GBP RICS House Price Balance (Jan) 49% 52% 49%
  EUR Eurogroup Meetings        
  USD Initial Jobless Claims   281K 285K  
  CAD New Housing Price Index (MoM) (Dec)   0.2% 0.2%  
  USD Fed Chair Yellen Testifies  

 

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Upcoming Economic Events that you should be monitoring:

Friday, February 12, 2016

Holiday           China – Lunar New Year

Cur. Event Actual Forecast Previous
  AUD RBA Governor Stevens Speaks        
  AUD Home Loans (MoM) (Dec)   3.0% 1.8%  
  EUR German CPI (MoM) (Jan)   -0.8% -0.8%  
  EUR German GDP (QoQ) (Q4)   0.3% 0.3%  
  EUR German GDP (YoY) (Q4)   2.3% 1.8%  
  EUR EU Finance Ministers Meeting        
  EUR GDP (YoY) (Q4)   1.5% 1.6%  
  EUR GDP (QoQ) (Q4)   0.3% 0.3%  
  EUR Industrial Production (MoM) (Dec)   0.3% -0.7%  
  USD Core Retail Sales (MoM) (Jan)   0.1% -0.1%  
  USD Export Price Index (MoM) (Jan)   -0.9% -1.1%  
  USD Import Price Index (MoM) (Jan)   -1.4% -1.2%  
  USD Retail Sales (MoM) (Jan)   0.1% -0.1%  
  USD FOMC Member Kaplan Speaks        
  USD Business Inventories (MoM) (Dec)   0.1% -0.2%  
  USD FOMC Member Dudley Speaks        
  USD Michigan Consumer Expectations   82.0 82.7

Government Bond Auctions

Date Time and Country

Feb 11 N/A Italy Euro 4-5bn 30-yr syndicated bond auction

Feb 11 11:03 Sweden Holds I/L bond auction

Feb 11 11:10 Italy Announces details of bond auction

Feb 11 11:30 UK 3.5% 2045 Gilt auction

Feb 11 19:00 US Holds 30-year bond auction

Feb 11 n/a US Details of 30-yr TIPS auction on Feb 18

Feb 12 11:10 France Details of bond auction on 18 Feb

 

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