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
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.
Major Economic Events That Will Affect The Markets In December
Cur. |
Event |
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Tuesday, December 1, 2015 |
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CNY |
Manufacturing PMI (Nov) |
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CNY |
Caixin Manufacturing PMI (Nov) |
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AUD |
Interest Rate Decision (Dec) |
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AUD |
RBA Rate Statement |
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EUR |
German Manufacturing PMI |
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EUR |
German Unemployment Change |
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GBP |
BoE Gov. Carney Speaks |
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GBP |
Manufacturing PMI (Nov) |
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USD |
ISM Manufacturing PMI (Nov) |
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Wednesday, December 2, 2015 |
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AUD |
GDP (QoQ) (Q3) |
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GBP |
Construction PMI (Nov) |
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EUR |
CPI (YoY) (Nov) |
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USD |
ADP Nonfarm |
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USD |
Fed Chair Yellen Speaks |
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Thursday, December 3, 2015 |
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GBP |
Services PMI (Nov) |
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EUR |
Interest Rate Decision |
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EUR |
ECB Press Conference |
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USD |
Yellen Testifies |
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Friday, December 4, 2015 |
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AUD |
Retail Sales (MoM) (Oct) |
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USD |
Nonfarm Payrolls (Nov) |
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USD |
Unemployment Rate |
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EUR |
ECB President Draghi |
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Tuesday, December 8, 2015 |
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CNY |
Trade Balance (Nov) |
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GBP |
Manufacturing Product |
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Wednesday, December 9, 2015 |
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CNY |
CPI (YoY) (Nov) |
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NZD |
Interest Rate Decision |
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Thursday, December 10, 2015 |
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AUD |
Employment Change |
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GBP |
Interest Rate Decision |
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Friday, December 11, 2015 |
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USD |
Core Retail Sales (MoM) |
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USD |
PPI (MoM) (Nov) |
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USD |
Retail Sales (MoM) (Nov) |
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Saturday, December 12, 2015 |
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CNY |
Industrial Production |
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Sunday, December 13, 2015 |
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JPY |
Tankan Large |
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JPY |
Tankan Large Non- |
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Tuesday, December 15, 2015 |
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GBP |
CPI (YoY) (Nov) |
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EUR |
German ZEW Economic |
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Wednesday, December 16, 2015 |
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EUR |
German Manufacturing |
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GBP |
Claimant Count Change |
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EUR |
CPI (YoY) (Nov) |
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USD |
Fed Interest Rate |
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NZD |
GDP (QoQ) (Q3) |
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Thursday, December 17, 2015 |
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EUR |
German Ifo Business |
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GBP |
Retail Sales (MoM) (Nov) |
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Thursday, December 24, 2015 |
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All Day |
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Holiday |
Germany – Christmas Eve |
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Holiday |
United States – Christmas Eve – Early close at 13:30 |
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