GBP/USD Fundamental Forecast – June 2016

The GBP/USD is slightly down for the month against a very strong US dollar as traders are on edge ahead of the Brexit vote this month. The pound closed at 1.4512 and is down 1.55% year to date while the greenback is up 2.95% for the month.

British Prime Minister David Cameron reluctantly offered the public a direct say over the country’s E.U. membership for much the same reason he acceded to the Scottish call for an independence vote in 2014: He thought it was the only way to settle the fundamental questions at the heart of British identity. Is the United Kingdom part of Europe or not? Is it one nation or more?

But the potential for a British exit from the E.U. to reawaken the push for Scottish independence reflects just how much Cameron’s strategy may have backfired. Instead of laying the issues to rest, critics say, he may have unleashed the age of the “neverendum” — a prolonged period of turbulence that does not stop until the public votes to take Britain out of Europe and split Scotland from the United Kingdom.

Investors are very much in wait-and-see mode right now with the next month bringing two very notable risk events, the EU referendum in the UK and a possible rate hike from the Fed. Investors have been in denial about the potential for a summer rate hike for most of this year but appear to be coming around to the idea now that the Fed has firmed up its stance on the matter, insisting that June is very much live and a hike is warranted if the data continues to perform as it has.

Bank of England Governor Mark Carney could have another say in this and is likely to focus primarily around the referendum, with the BoEs forecasts being based on the assumption that we remain in the EU. Carney has come in for some heavy criticism over his views on the economic impact of a Brexit in recent months which may make today’s appearance a little feisty and uncomfortable for him.

FxEmpire provides in-depth analysis for each currency and commodity 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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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