GBP/USD Fundamental Forecast – September 1, 2016

The GBP/USD posted a solid gain on Wednesday, trading 1.3134, up 0.0029 or 0.22%, as investors showed mixed reactions to several key reports ahead of Friday’s important U.S. Non-Farm Payrolls data.

The British Pound posted an early two-sided trade against the U.S. Dollar as investors first sold the Sterling in reaction to a neutral U.S. private sector jobs report before heading higher on short-covering and position-squaring ahead of Friday’s key jobs report.

Early in the session, the market was underpinned by better-than-expected Nationwide HPI data, which came in better-than-expected at 0.6%. Traders were looking for a reading of -0.1%.

Later in the session, traders initially reacted negatively to the ADP Non-Farm Employment Change report for August that came in slightly better-than-expected at 177K. The market was expecting a 175K reading.

The price action suggests that British Pound investors were primarily focused on the housing data since this sector took the brunt of the decision to leave the European Union back in June. The rise in the HPI was a happy surprise because recent data showed that housing market activity has slowed in recent months. New buyer inquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum.

Recent price action suggests that GBP/USD investors may be increasing bets that the Bank of England will refrain from a rate cut when it next meets on September 15. Furthermore, it may even take a pass on additional stimulus. The lack of aggressive selling pressure recently suggests that perhaps the experts were a little too gloomy about Brexit expectations since the data seems to be coming out better than expected.

Those placing bets on the BoE standing aside this time around will have a battle on their hands if Friday’s jobs report comes out better-than-expected. This could mean a September rate hike by the Fed that would likely lead to a stronger U.S. Dollar. Bullish GDP/USD investors would have to overcome this data to boost the Forex pair and that battle could cause increased volatility over the near-term because it would have to trigger the start of a massive short-covering rally.

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.

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Thursday, September 1, 2016

Government Bond Auctions

Date/Time Country Type

Aug 31 11:05 Norway Holds bond auction

Aug 31 11:30 Germany Eur 4bn Sep 2018 Schatz

Sep 01 10:30 Spain Holds bond auction

Sep 01 11:30 UK Jul 2022 Gilt

Sep 01 11:50 France Holds bond auction