GBP/USD Fundamental Forecast – July 27, 2016

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Updated: Jul 26, 2016, 08:14 GMT+00:00

The GBP/USD dipped 55 points against a weaker US dollar. The FOMC will begin its two day meeting later in the session among a long list of positive US

GBP/USD Fundamental Forecast – July 27, 2016

The GBP/USD dipped 55 points against a weaker US dollar. The FOMC will begin its two day meeting later in the session among a long list of positive US data while the UK is seeing nothing but red as projects from the World Bank and the IMF are negative for the UK in the short term. The pound is trading at 1.3085.

The GBP has tumbled almost 12 percent against the dollar since Britons voted to leave the European Union last month. Investors are worried that “Brexit” will have negative consequences on the economy and in particular Britain’s already huge current account deficit, which will widen further if investment flows dry up. Traders said any bounce in sterling would be likely to meet selling, with markets pricing in a chance of at least two rate cuts in the next six months.

Speculators have been selling the pound since the June referendum, with latest data showing net bets against the British currency at its highest since June 2013

The main headline grabber contained in the numbers was the evidence of a continued surge of support from ‘those in the know’ for the US Dollar. Speculators’ net long positions on the Buck increased from the previous week’s USD8.01 bln to a heady USD10.42 bln – this represented the highest level of Dollar-positive bets since the early part of last month.

The figure suggests that investors hold out high hopes for this Wednesday’s US Federal Reserve monetary policy announcement; an increase to the cost of borrowing Stateside is considered highly unlikely for this month, but any suggestion from the Fed that it has been encouraged enough by June’s strong US job creation figures to countenance another near-term interest rate hike would be enough to send the Greenback higher across the board.

Elsewhere, the CFTC numbers, which covered the week ending Tuesday 19th July, also revealed an increase in the level of negativity enveloping the Pound Sterling following the decision by UK voters on 23rd June to exit the European Union. The net volume of bets against the Pound jumped from a total of GBP60.07 bln the previous week to a mighty GBP74.39 bln at the latest count. Futures markets are now factoring-in at least 50 basis points’ worth of cuts to the Bank of England’s Base Rate during the next twelve months – a move which would send the British cost of borrowing to below zero – and the short to medium term outlook for the UK unit has rarely been bleaker.

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Wednesday, July 27, 2016

Country	Name	Volatility	Previous
AUD	Consumer Price Index (QoQ)	3	-0.2
AUD	RBA trimmed mean CPI (YoY)	3	1.7
AUD	Consumer Price Index (YoY)	3	1.3
AUD	RBA trimmed mean CPI (QoQ)	3	0.2
EUR	Gfk Consumer Confidence Survey	2	10.1
GBP	Gross Domestic Product (YoY)	2	2
GBP	Gross Domestic Product (QoQ)	2	0.4
USD	Durable Goods Orders	3	-2.2
USD	Durable Goods Orders Core	3	-0.3
USD	Pending Home Sales (YoY)	2	2.4
USD	Pending Home Sales (MoM)	2	-3.7
USD	Fed’s Monetary Policy Statement	3
USD	Fed Interest Rate Decision	3	0.5