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

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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.

Date

Last

Open

High

Low

Change %

Jul 06, 2012

1.5488

1.5530

1.5551

1.5461

-0.26%

Jul 05, 2012

1.5529

1.5582

1.5623

1.5500

-0.34%

Jul 04, 2012

1.5582

1.5689

1.5690

1.5575

-0.68%

Jul 03, 2012

1.5689

1.5690

1.5713

1.5659

-0.01%

Jul 02, 2012

1.5690

1.5680

1.5722

1.5642

0.06%

 

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

Date

Currency

 Event

Actual

Forecast

Previous

Jul 2

CHF

Retail Sales y/y

6.2%

2.1%

0.2%

EUR

Spanish Manufacturing PMI

41.1

 

42.0

GBP

Manufacturing PMI

48.6

46.6

45.9

USD

ISM Manufacturing PMI

49.7

52.1

53.5

Jul 3

GBP

Construction PMI

48.2

53.1

54.4

Jul 4

GBP

Services PMI

51.3

52.9

53.3

Jul 5

EUR

Spanish 10-y Bond Auction

6.43|3.2

 

6.04|3.3

GBP

Asset Purchase Facility

375B

375B

325B

GBP

Official Bank Rate

0.50%

0.50%

0.50%

EUR

Minimum Bid Rate

0.75%

0.75%

1.00%

USD

ADP Non-Farm Employment Change

176K

103K

136K

USD

Unemployment Claims

374K

385K

388K

USD

ISM Non-Manufacturing PMI

52.1

53.1

53.7

Jul 6

CHF

Foreign Currency Reserves

364.9B

 

305.9B

CHF

CPI m/m

-0.3%

-0.3%

0.0%

GBP

PPI Input m/m

-2.2%

-2.1%

-2.6%

USD

Non-Farm Employment Change

80K

97K

77K

USD

Unemployment Rate

8.2%

8.2%

8.2%

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

Date

Time

Currency

 Event

Previous

Jul 9

8:00

EUR

Sentix Investor Confidence

-28.9

23:01

GBP

BRC Retail Sales Monitor y/y

1.3%

23:01

GBP

RICS House Price Balance

-16%

Jul 10

6:45

EUR

French Industrial Production m/m

1.5%

8:30

GBP

Manufacturing Production m/m

-0.7%

8:30

GBP

Trade Balance

-10.1B

14:00

GBP

NIESR GDP Estimate

0.1%

Jul 11

12:30

USD

Trade Balance

-50.1B

14:30

USD

Crude Oil Inventories

-4.3M

Jul 12

9:00

EUR

Industrial Production m/m

-0.8%

12:30

USD

Unemployment Claims

 

12:30

USD

Import Prices m/m

-1.0%

18:00

USD

Federal Budget Balance

-124.6B

7:15

CHF

PPI m/m

-0.2%

Jul 13

12:30

USD

PPI m/m

-1.0%

13:55

USD

Prelim UoM Consumer Sentiment

73.2

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