GBP/USD Weekly Fundamental Analysis June 4 – 8, 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 fell the entire week, closing at 1.5363. The week was in risk aversion mode as Spain, Italy and Greece were like the acts in a 3 ring circus, moving back and forth to center stage but always performing. Between the bickering amongst politicians and bankers, Spain and the election polls in Greece and the Italian bond yields, the markets were not sure what to look at next.

The USD continued to soar, climbing to record highs with the DI trading well above 0.83.

This was a week of news flows, which the IMF, the ECB, the EU and the OECD making headlines daily. The lasting headline was a warning to the Bank of England and its inaction. The UK economy has been suspect for a while now with no strongly negative eco data, expect GDP and then the revision of the GDP reinforcing the technical recession, which markets had shrugged off weeks ago, but was not keeping investors away from the sterling. It was originally thought that the pound would benefit by the risk aversion and negative sentiment towards the euro, but investors shied away allowing the sterling to weaken.

Date

Last

Open

High

Low

Change %

Jun 01, 2012

1.5363

1.5396

1.5436

1.5268

-0.22%

May 31, 2012

1.5397

1.5482

1.5526

1.5362

-0.54%

May 30, 2012

1.5481

1.5632

1.5638

1.5472

-0.97%

May 29, 2012

1.5632

1.5666

1.5716

1.5609

-0.22%

May 28, 2012

1.5667

1.5679

1.5717

1.5664

-0.08%

 June 7th is the day to watch, with the BoE rate decision and statement. Last month, the BoE left everything on hold, allowing them to avoid making a public statement.

US markets should face relatively few domestic market influences next week and will instead spend much of the week focused upon global factors.  Data flow will be fairly light.  Total factory orders are expected to come in roughly flat and in line with previously released durable goods orders, and the only new information here will be nondurable goods orders.  ISM services should continue to demonstrate signs of a modest service sector expansion, but the pace has significantly diminished since February.  The Fed’s Beige Book should point to mixed regional economic conditions, with regional anecdotes of soft job markets combined with mildly more encouraging manufacturing and housing markets.  Friday’s April trade report will be used partly for revisions and how they may impact the third swing at US Q1 GDP, but should also start off Q2 on mildly firmer footings in nominal terms as lower oil prices begin to benefit the trade balance.  Offsetting much of this via exports is likely to be softening growth in China and no growth in Europe on balance. 

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 up to the data analysis and information in our weekly reports.

Major Economic Events for the week of May 28- June 1 actual v. forecast for Euro, GPB, and the Franc

 Time

Cur.

 

  Event

Actual

Forecast

Previous

 

Tuesday, May 29

06:00

 GBP

 

CBI Distributive Trades Survey

21

-7

-6

 

 

Wednesday, May 30

03:00

 CHF

 

KOF Leading Indicators

0.81

0.48

0.43

 

 

Thursday, May 31

01:45

 CHF

 

GDP (QoQ)

0.7%

0.1%

0.5%

 

 

02:00

 GBP

 

Nationwide HPI (MoM)

0.3%

0.2%

-0.3%

 

 

05:00

 EUR

 

CPI (YoY) 

2.4%

2.5%

2.6%

 

 

Friday, June 01

03:15

 CHF

 

Retail Sales (YoY)

0.1%

2.0%

4.7%

 

 

03:30

 CHF

 

SVME PMI

45.4

46.4

46.9

 

 

04:00

 EUR

 

Manufacturing PMI

45.1

45.0

45.0

 

 

04:30

 GBP

 

Manufacturing PMI

45.9

49.7

50.2

 

 

05:00

 EUR

 

Unemployment Rate

11.0%

11.0%

11.0%

 

 

Major Economic Events for the week of May 28- June 1 actual v. forecast for the US Dollar

Time

Cur.

 

     Event

Actual

Forecast

Previous

 

 

Tuesday, May 29

 

10:00

 USD

 

CB Consumer Confidence

64.9

70.0

68.7

 

 

Wednesday, May 30

 

10:00

 USD

 

Pending Home Sales (MoM)

-5.5%

0.1%

3.8%

 

 

Thursday, May 31

 

08:15

 USD

 

ADP Nonfarm Employment Change

133K

148K

113K

 

 

08:30

 USD

 

Continuing Jobless Claims

3242K

3250K

3278K

 

 

08:30

 USD

 

Initial Jobless Claims

383K

370K

373K

 

 

08:30

 USD

 

GDP (QoQ) 

1.9%

1.9%

2.2%

 

 

09:45

 USD

 

Chicago PMI

52.7

56.5

56.2

 

 

Friday, June 01

 

08:30

 USD

 

Average Weekly Hours

34.4

34.5

34.5

 

 

08:30

 USD

 

Private Nonfarm Payrolls

82K

160K

87K

 

 

08:30

 USD

 

Unemployment Rate

8.2%

8.1%

8.1%

 

 

08:30

 USD

 

Personal Spending (MoM)

0.3%

0.3%

0.2%

 

 

08:30

 USD

 

Core PCE Price Index (MoM)

0.1%

0.2%

0.2%

 

 

08:30

 USD

 

Nonfarm Payrolls

69K

150K

77K

 

 

08:30

 USD

 

Average Hourly Earnings (MoM)

0.1%

0.2%

0.1%

 

 

10:00

 USD

 

ISM Manufacturing Index

53.5

53.9

54.8

 

 

                             

Historical:

Highest: 1.681 USD on Nov 17, 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

 

Forecast

Previous

 

Jun 5

9:00

EUR

Retail Sales m/m

 

0.3%

10:00

EUR

German Factory Orders m/m

 

2.2%

14:00

USD

ISM Non-Manufacturing PMI

 

53.5

 

Jun 6

6th-8th

GBP

Halifax HPI m/m

   

8:30

GBP

Construction PMI

 

55.8

10:00

EUR

German Industrial Production m/m

 

2.8%

12:30

EUR

ECB Press Conference

   

12:30

USD

Revised Nonfarm Productivity q/q

 

-0.5%

14:30

USD

Crude Oil Inventories

   

18:00

USD

Beige Book

   

23:01

GBP

BRC Retail Sales Monitor y/y

 

-3.3%

 

Jun 7

7:00

CHF

Foreign Currency Reserves

 

235.6B

7:15

CHF

CPI m/m

 

0.1%

8:30

GBP

Services PMI

 

53.3

11:00

GBP

Asset Purchase Facility

 

325B

11:00

GBP

Official Bank Rate

0.50%

0.50%

TBD

GBP

MPC Rate Statement

   

12:30

USD

Unemployment Claims

 

383K

14:00

USD

Fed Chairman Bernanke Testifies

   

 

Jun 8

8:30

GBP

PPI Input m/m

 

-1.5%

8:30

GBP

Consumer Inflation Expectations

 

3.5%

12:30

USD

Trade Balance

 

-51.8B

14:00

USD

Fed Chairman Bernanke Testifies

   
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About: FX Empire Analyst - Barry Norman

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