GBP/USD Monthly Fundamental Forecast October 2012

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Outlook and Recommendation

The GBP/USD closed September at 1.6140 after the US mounted a comeback at the very end of the month. The pair had broken above 1.63 just a week ago. In late September, GBP was flirting with 13-month highs vs. the USD.  Risk reversals and a shift in the GBP position from net short to long (CFTC), suggest that sentiment is favorable. Fundamentals are weak, but these are offset by other factors, including the UK’s “AAA” rating and its destination for inter-European flows. In addition on a relative basis, the currency foundation for GBP is stronger than it is for the USD, which faces loose monetary policy and uncertain fiscal policy.

Highest: 1.6310

Lowest: 1.5826

Difference: 0.0484

Average: 1.6119

Change %: 1.81

A buoyant labor market, rising real incomes, a moderating pace of disinflation, and a comparatively favorable standing in global financial markets (thanks to the nation’s Triple-A credit rating and partial disconnect from the euro crisis) mean that the argument for more monetary stimulus from the Bank of England (BoE) is more marginal than it was. Though the growth outlook remains fundamentally weak, the first half of 2012 proved less downbeat than originally reported; second-quarter GDP was again revised higher in the final reading, to -0.4% q/q from an initial estimate of -0.7%, due to milder declines in construction and industrial production. This implies a smaller contraction for the year overall (-0.3%, versus -0.4% previously), further supporting the relative strength of the GBP. Employment data has been remarkably solid; the economy added 236,000 jobs in the three months to July, the most in two years, while the level of jobless claims has seen steep declines in recent months. This has sustained a robust pace in domestic demand, evidenced by average retail sales growth of almost 3% y/y in May-August. The external sector, however, is an increasing drag on the economy. Currency strength, combined with the recession on the continent and slower growth internationally, has pushed the UK’s trade and current account deficits to record levels

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.

Central Bank – The Bank of England

Date of next meeting or last meeting: Oct 04, 2012

Current Rate: 0.500%

Economic events for the month of October affecting EUR, CHF, GBP and USD

Date

Time

Currency

Event 

Forecast

Previous

Oct 1

 8:30

GBP

Manufacturing PMI

49.5

49.5

 

14:00

USD

ISM Manufacturing PMI

50.0

49.6

Oct 2

8:30

GBP

Construction PMI

50.0

49.0

Oct 3

8:30

GBP

Services PMI

53.1

53.7

 

12:15

USD

ADP Non-Farm Employment Change

148K

201K

 

14:00

USD

ISM Non-Manufacturing PMI

53.4

53.7

Oct 4

11:00

GBP

Asset Purchase Facility

375B

375B

 

11:00

GBP

Official Bank Rate

0.50%

0.50%

 

Tentative

GBP

MPC Rate Statement

   
 

11:45

EUR

Minimum Bid Rate

0.75%

0.75%

 

12:30

EUR

ECB Press Conference

   
 

12:30

USD

Unemployment Claims

371K

359K

 

18:00

USD

FOMC Meeting Minutes

   

Oct 5

7:00

CHF

Foreign Currency Reserves

 

418.4B

 

12:30

USD

Non-Farm Employment Change

111K

96K

 

12:30

USD

Unemployment Rate

8.2%

8.1%

Oct 8

7:15

CHF

CPI m/m

 

0.0%

Oct 9

8:30

GBP

Manufacturing Production m/m

 

3.2%

Oct 11

All Day

ALL

G7 Meetings

   
 

12:30

USD

Trade Balance

 

-42.0B

 

12:30

USD

Unemployment Claims

   

Oct 12

12:30

USD

PPI m/m

 

1.7%

 

13:55

USD

Prelim UoM Consumer Sentiment

   

Oct 15

12:30

USD

Core Retail Sales m/m

 

0.8%

 

12:30

USD

Retail Sales m/m

 

0.9%

Oct 16

8:30

GBP

CPI y/y

 

2.5%

 

8:30

GBP

PPI Input m/m

   
 

9:00

EUR

German ZEW Economic Sentiment

   
 

12:30

USD

Core CPI m/m

   

Oct 17

8:30

GBP

Claimant Count Change

   
 

8:30

GBP

MPC Meeting Minutes

   

Oct 18

8:30

GBP

Public Sector Net Borrowing

   
 

8:30

GBP

Retail Sales m/m

   
 

14:00

USD

Philly Fed Manufacturing Index

   

Oct 19

14:00

USD

Existing Home Sales

   

Oct 24

7:00

EUR

French Flash Manufacturing PMI

   
 

7:30

EUR

German Flash Manufacturing PMI

   
 

8:00

EUR

German Ifo Business Climate

   
 

14:00

USD

New Home Sales

   
 

18:15

USD

FOMC Statement

   

Oct 25

12:30

USD

Core Durable Goods Orders m/m

   
 

12:30

USD

Unemployment Claims

   
 

14:00

USD

Pending Home Sales m/m

   

Oct 26

8:30

GBP

Prelim GDP q/q

   
 

12:30

USD

Advance GDP q/q

 

1.3%

Oct 30

14:00

USD

CB Consumer Confidence

   

Oct 31

12:15

USD

ADP Non-Farm Employment Change

   

 

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