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GBP/USD Monthly Fundamental Forecast – December 2015

By:
Barry Norman
Published: Dec 1, 2015, 14:15 UTC

Outlook and Recommendation The GBP/USD stared December at the bottom of its trading range as the greenback remains strong. UK data in November was not bad

GBP/USD Monthly Fundamental Forecast – December 2015

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Outlook and Recommendation

The GBP/USD stared December at the bottom of its trading range as the greenback remains strong. UK data in November was not bad and the BoE outlooks were positive although a rate increase is now not until 2017. The annual budget was much better than expected with Osborne’s comments positive. The pound moved into December at 1.5062.  In the United Kingdom, the start of the Fed’s policy tightening cycle will underpin our call for the Bank of England (BoE) to begin its own policy normalization process early in 2016. We expect the British pound (GBP) to remain better supported as a result but acknowledge that “Brexit” risks – please note that a referendum on Great Britain’s continuity as a European Union member will likely be conducted in 2017 but remain a threat to markets constructive GBP view.

The pound’s fortunes are likely to diverge next week, pulled higher by the European Central Bank and dragged lower by the Federal Reserve.

The U.K. currency has weakened against both the dollar and euro in the past week, as Bank of England Governor Mark Carney emphasized that eventual interest-rate increases will be gradual, while data confirmed the pace of economic growth in the nation slowed in the third quarter. In the next week, currency traders may be more likely to take their cues from elsewhere, as the ECB meets amid speculation it will boost stimulus.

After a strong start to the year, the UK economy is advancing at a moderately less buoyant pace, with real GDP growth decelerating to 0.5% q/q in the third quarter, down from a 0.7% advance in the prior quarter. UK growth continued to be driven by steady service sector demand. However, this was partially offset by a sharp contraction in construction activity and weakness in manufacturing, which has been struggling in recent quarters alongside slower growth in emerging markets and relative GBP strength. Meanwhile, consumer price inflation fell back into negative territory in September, with the headline print decreasing by 0.1% y/y, down from a flat reading in August. Nevertheless, it’s important to note that UK growth is forecast to continue to outpace most other developed economies this year, with real GDP set to advance by 2.5% before decelerating slightly to 2.2% in 2016 and 2% in 2017

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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Major Economic Events That Will Affect The Markets In December

 

Cur.

   

Event

 

 

 

 

 

Tuesday, December 1, 2015

 

  CNY

 

Manufacturing PMI (Nov)

 

 

 

 

 

 

  CNY

 

Caixin Manufacturing PMI (Nov)

 

 

 

 

 

 

  AUD

 

Interest Rate Decision (Dec)

 

 

 

 

 

 

  AUD

 

RBA Rate Statement  

 

 

 

 

 

 

  EUR

 

German Manufacturing PMI

 

 

 

 

 

 

  EUR

 

German Unemployment Change

 

 

 

 

 

 

  GBP

 

BoE Gov. Carney Speaks  

 

 

 

 

 

 

  GBP

 

Manufacturing PMI (Nov)

 

 

 

 

 

 

  USD

 

ISM Manufacturing PMI (Nov)

 

 

 

 

 

Wednesday, December 2, 2015

 

  AUD

 

GDP (QoQ) (Q3)

 

 

 

 

 

 

  GBP

 

Construction PMI (Nov)

 

 

 

 

 

 

  EUR

 

CPI (YoY) (Nov)  

 

 

 

 

 

 

  USD

 

ADP Nonfarm

 

 

 

 

 

 

  USD

 

Fed Chair Yellen Speaks  

 

 

 

 

 

Thursday, December 3, 2015

 

  GBP

 

Services PMI (Nov)

 

 

 

 

 

 

  EUR

 

Interest Rate Decision

 

 

 

 

 

 

  EUR

 

ECB Press Conference  

 

 

 

 

 

 

  USD

 

Yellen Testifies  

 

 

 

 

 

Friday, December 4, 2015

 

  AUD

 

Retail Sales (MoM) (Oct)

 

 

 

 

 

 

  USD

 

Nonfarm Payrolls (Nov)

 

 

 

 

 

 

  USD

 

Unemployment Rate

 

 

 

 

 

 

  EUR

 

ECB President Draghi 

 

 

 

 

 

Tuesday, December 8, 2015

 

  CNY

 

Trade Balance (Nov)

 

 

 

 

 

 

  GBP

 

Manufacturing Product

 

 

 

 

 

Wednesday, December 9, 2015

 

  CNY

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  NZD

 

Interest Rate Decision

 

 

 

 

 

Thursday, December 10, 2015

 

  AUD

 

Employment Change

 

 

 

 

 

 

  GBP

 

Interest Rate Decision

 

 

 

 

 

Friday, December 11, 2015

 

  USD

 

Core Retail Sales (MoM)

 

 

 

 

 

 

  USD

 

PPI (MoM) (Nov)

 

 

 

 

 

 

  USD

 

Retail Sales (MoM) (Nov)

 

 

 

 

 

Saturday, December 12, 2015

 

  CNY

 

Industrial Production

 

 

 

 

 

Sunday, December 13, 2015

 

  JPY

 

Tankan Large

 

 

 

 

 

 

  JPY

 

Tankan Large Non-

 

 

 

 

 

Tuesday, December 15, 2015

 

  GBP

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  EUR

 

German ZEW Economic

 

 

 

 

 

Wednesday, December 16, 2015

 

  EUR

 

German Manufacturing

 

 

 

 

 

 

  GBP

 

Claimant Count Change

 

 

 

 

 

 

  EUR

 

CPI (YoY) (Nov)

 

 

 

 

 

 

  USD

 

Fed Interest Rate

 

 

 

 

 

 

  NZD

 

GDP (QoQ) (Q3)

 

 

 

 

 

Thursday, December 17, 2015

 

  EUR

 

German Ifo Business

 

 

 

 

 

 

  GBP

 

Retail Sales (MoM) (Nov)

 

 

 

 

 

Thursday, December 24, 2015

All Day

 

Holiday

Germany – Christmas Eve

 

 

Holiday

United States – Christmas Eve – Early close at 13:30

                     

 

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