GBP/USD Weekly Fundamental Analysis July 9-13, 2012, Forecast

Introduction: While the ranges are wider (and so should stops be), the lines are rather distinctive, especially towards the borders of the long term wide range. This pair makes for good trades, with the new austerity program implemented in the UK, the GBP is moving more on Fundamentals now.

• The interest rate differential between the Bank of England(BoE) and the Federal Reserve
• High yield and attractive growth in the UK drives GBP/USD higher

Weekly Analysis and Recommendation:

The GBP/USD ended the week down trading at 1.5488 on poor eco data, and negative growth outlooks.

Recent reports in the UK continue to support an economic slowdown, even with the hardcore austerity measures adopted early by the Cameron administration. The contagion from the EU continues to pull down the UK economy. The Bank of England did as expected and held rates but injected more monetary stimulus through their asset purchase program. The move was heralded by the markets but did not have an effect on the currency.

A welcomed partial easing in financial market stress is the core theme driving foreign exchange markets into the summer. This has come on the back of three important themes: the first is progress in Europe that has dissipated the immediate threat of a partial currency union break-up. The second is the completion of the re-pricing of a lower global growth trajectory. Finally, and potentially most important, has been the ongoing central bank commitment to collectively ease strains and protect financial market stability. Risk appetite has improved, opening the door for a partial retracement of the spring US dollar (USD) rally. The most significant risk to the FX outlook is also embedded in the above noted themes: an escalation in the European crisis, a downward revision to global growth and inadequate central bank policy responses. 

The strength of the USD even after a very poor Nonfarm report on Friday, has held the GBP in place. With continued poor eco data from the US, speculators are dreaming about Ben Bernanke and his big guns.

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 of July 2 – 6 actual v. forecast for Euro, GPB, the Franc, and USD

Historical:

Highest: 1.681 USD on Nov17, 2009.

Average: 1.5807 USD over this period

Lowest: 1.3506 USD on Jan 23, 2009.

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD