GBP/USD Weekly Fundamental Analysis – January 25-29, 2016 -Forecast

Weekly Analysis and Recommendation: 

The GBP/USD reversed its down trend at the end of the week to close at 1.4268 and is expected to rise ahead of GDP reports due this week. The pound gained 0.7% for the week.  Sterling added 0.7 per cent against the euro at €1.3149, rallying from a recent one-year low, with the single currency depressed by the ECB stimulus hints on Thursday. The rally left the pound on track for its first week of gains in nine against the currency of its biggest trading partner, although it was still down around 8 per cent from just two months ago. The spike in the pound came as the latest figures from the Office of National Statistics revealed that UK government borrowing dropped sharply in December. 

Chancellor George Osborne will still have a tough job to achieve his target of reducing borrowing in the 2015/16 tax year to £73.5billion, though January tends to see a big surplus from annual income tax payments.

Mr Osborne warned earlier this month that Britain faced a ‘cocktail of risks’ from abroad this year, and that it was essential to stick with the deficit-reduction plan that has been his central political project since taking office in 2010.

David Kern, chief economist at the British Chambers of Commerce, said: ‘After November’s setback, the marked improvement in December makes it likely that public finances will show an overall improvement in the current financial year, and there is a chance that the OBR’s forecast made in the Autumn Statement will be met.

‘There is still no room for complacency, and the task ahead remains huge. The weaker financial sector and depleted oil and gas output mean that the UK’s ability to generate tax receipts has experienced a long-term decline, and we must adjust our public spending plans to this reality and do more to boost our tax base.’

But in seemingly less positive economic news today, UK retail spending suffered its biggest year-on-year fall in over six years during the crucial Christmas selling season.

December retail sales contracted 1.0 per cent from the previous month, well below economists’ forecasts. November’s figure was also revised down to a 1.3 per cent rate of growth from an initial estimate of 1.7 per cent.

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 for the week:

 

Upcoming Government Bond Auctions

Date Time Country 

Jan 25 11:30 Germany EUR 1.5bn Jan 2017 Bubill

Jan 25 13:00 Norway Details of bond auction on Jan 27

Jan 25 17:20 Italy Details of BTP/CCTeus on 28 Jan

Jan 26 11:10 Italy Holds CTZ/linker bond auction

Jan 26 n/a US Holds 2-year note auction

Jan 27 11:05 Norway Holds bond auction

Jan 27 11:30 Germany EUR 1bn 2.5% Aug 2046 Bund

Jan 27 17:20 Sweden Details of bond auction on 03 Feb

Jan 27 n/a US Holds 2-year FRN auction

Jan 27 n/a US Holds 5-year note auction

Jan 28 11:03 Sweden Holds I/L bond auction

Jan 28 11:10 Italy Holds BTP/CCTeus auction

Jan 28 n/a US Holds 7-year note auction

Feb 02 n/a UK Details of Gilt auctions on Feb 09 & 11