GBP/USD Weekly Fundamental Analysis September 10-14, 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 is broke above 1.60 and is holding at that price over the weekend. The pair is trading now at 1.6009 after hitting a seasonal high of 1.6034. The US dollar weakened on Friday as reports showed that US employers added 96,000 jobs last month, a weak figure that could slow the momentum President Barack Obama hoped to gain from his speech to the Democratic National Convention.

The unemployment rate fell to 8.1 per cent from 8.3 per cent in July. But that was only because more people gave up looking for jobs. People who are out of work are counted as unemployed only if they’re looking for a job.

The government also said that 41,000 fewer jobs were created in July and June than first estimated. The economy has added just 139,000 jobs a month since the start of the year, below 2011′s average of 153,000.

Cash-short state and local governments were a key reason the job market was weaker in June and July than first estimated. Federal, state and local governments cut 39,000 jobs in those months – above the earlier estimate of 18,000. In previous recoveries, governments have typically added jobs, not shed them.

This boosts the possibility of QE from the FOMC this week. The ECB bond buying program is now a reality as Mario Draghi now tries to put his plans to action. The BoE held rates this week but what might come next is not for certain.

The conventional wisdom is that quantitative easing (QE) by central banks causes the currency concerned to weaken. That might be true for some currencies, notably US dollar. For others, including sterling, the implications are more ambiguous, and there is a case for thinking the next round of QE in the UK will be associated with sterling appreciation rather than depreciation.

If surveys of analyst expectations are any guide to what markets are pricing in, there appears to be complete clarity on the policy outlook in the UK. In the US, however, the Federal Open Market Committee’s (FOMC) June statement merely extended the uncertainty.

After the release of the Bank of England’s (BoE) June Monetary Policy Committee (MPC) minutes, analysts surveyed by Reuters see a further bout of BoE QE as a near certainty. The median probability of another tranche of QE at the MPC announcement on July 5 stands at 80%, while 98% expect further QE at some point in the future. In contrast, a survey of primary dealers by Reuters puts the median probability of QE3 in the US at 50% – much as it was ahead of the latest FOMC meeting, but up from around 30% a month ago.

Date

Last

Open

High

Low

Change %

Sep 07, 2012

1.6009

1.5932

1.6034

1.5923

0.48%

Sep 06, 2012

1.5932

1.5903

1.5943

1.5882

0.18%

Sep 05, 2012

1.5903

1.5864

1.5934

1.5826

0.25%

Sep 04, 2012

1.5864

1.5880

1.5910

1.5856

-0.10%

Sep 03, 2012

1.5880

1.5866

1.5898

1.5851

0.09%

 

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 September 3-7, 2012 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Time

Currency

Event

Actual

Forecast

Previous

Sep. 03 

08:15

CHF

Retail Sales (YoY) 

3.2%

4.3%

3.3%

 

08:30

CHF

SVME PMI 

46.7

49.0

48.6

 

08:45

EUR

Italian Manufacturing PMI 

43.60

45.00

44.30

 

08:50

EUR

French Manufacturing PMI 

46.0

46.2

46.2

 

08:55

EUR

German Manufacturing PMI 

44.7

45.1

45.1

 

09:00

EUR

Manufacturing PMI 

45.1

45.3

45.3

 

09:30

GBP

Manufacturing PMI 

49.5

46.2

45.2

Sep. 04

06:45

CHF

GDP (QoQ) 

-0.1%

0.2%

0.5%

 

08:00

EUR

Spanish Unemployment Change 

38.20K

 

-27.80K

 

15:00

USD

ISM Manufacturing Index 

49.6

50.0

49.8

 

15:40

GBP

Services PMI 

53.7

51.5

51.0

Sep. 05

08:15

CHF

CPI (MoM) 

0.0%

0.1%

-0.5%

 

10:00

EUR

Retail Sales (MoM) 

-0.2%

-0.2%

0.1%

 

10:35

EUR

German 10-Year Bund Auction 

1.420%

 

1.420%

 

13:30

USD

Nonfarm Productivity (QoQ) 

2.2%

1.8%

1.6%

 

13:30

USD

Unit Labor Costs (QoQ) 

1.5%

1.5%

1.7%

Sep. 06 

08:00

GBP

Halifax House Price Index (MoM) 

-0.4%

0.3%

-0.7%

 

10:00

EUR

GDP (QoQ) 

-0.2%

-0.2%

-0.2%

 

11:00

EUR

German Factory Orders (MoM) 

0.5%

0.2%

-1.6%

 

12:00

GBP

Interest Rate Decision 

0.50%

0.50%

0.50%

 

12:00

GBP

BOE QE Total 

375B

375B

375B

 

12:45

EUR

Interest Rate Decision 

0.75%

0.75%

0.75%

 

13:15

USD

ADP Nonfarm Employment Change 

201K

140K

173K

 

13:30

USD

Initial Jobless Claims 

365K

370K

377K

 

13:30

USD

Continuing Jobless Claims 

3322K

3315K

3328K

 

15:00

USD

ISM Non-Manufacturing Index 

53.7

52.5

52.6

Sep. 07

06:45

CHF

Unemployment Rate 

2.9%

2.9%

2.9%

 

09:30

GBP

Industrial Production (MoM) 

2.9%

1.5%

-2.4%

 

09:30

GBP

Manufacturing Production (MoM) 

3.2%

2.0%

-2.9%

 

09:30

GBP

PPI Input (MoM) 

2.0%

1.7%

0.4%

 

09:30

GBP

PPI Input (YoY) 

1.4%

1.2%

-2.4%

 

09:30

GBP

Industrial Production (YoY) 

-0.8%

-2.8%

-3.8%

 

11:00

EUR

German Industrial Production (MoM) 

1.3%

0.2%

-0.4%

 

13:30

USD

Average Hourly Earnings (MoM) 

0.0%

0.2%

0.1%

 

13:30

USD

Nonfarm Payrolls 

96K

125K

141K

 

13:30

USD

Unemployment Rate 

8.1%

8.3%

8.3%

 

13:30

USD

Average Weekly Hours 

34.4

34.5

34.4

 

13:30

USD

Private Nonfarm Payrolls 

103K

138K

162K

 

15:00

GBP

NIESR GDP Estimate 

0.2%

 

0.3%

Historical: From 2010 to Present

Highest: 1.6747 USD on April 28, 2011.

Average: 1.5751 USD over this period

Lowest: 1.4229 USD on May 20, 2010.

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

Date

Time

Currency

Event

Forecast

Previous

Sep. 11

00:01

GBP

RICS House Price Balance 

-22% 

-24% 

 

09:30

GBP

Trade Balance 

-9.0B 

-10.1B 

 

13:30

USD

Trade Balance 

-44.2B 

-42.9B 

Sep. 12 

06:30

EUR

French CPI (MoM) 

 

-0.4% 

 

07:00

EUR

German CPI (MoM) 

0.3% 

0.3% 

 

07:00

EUR

German CPI (YoY) 

2.0% 

2.0% 

 

09:30

GBP

Average Earnings Index +Bonus 

1.6% 

1.6% 

 

09:30

GBP

Claimant Count Change 

0.5K 

-5.9K 

 

10:00

EUR

Industrial Production (MoM) 

-0.1% 

-0.6% 

 

13:30

USD

Import Price Index (MoM) 

1.3% 

-0.6% 

Sep. 13

08:15

CHF

PPI (MoM) 

-0.4% 

-0.3% 

Sep. 14

10:00

EUR

CPI (YoY) 

2.6% 

2.6% 

 

10:00

EUR

Employment Change (QoQ) 

 

-0.2% 

 

10:00

EUR

Core CPI (YoY) 

 

1.7% 

Government Bond Auction

Date Time Country 

Sep 10 09:30 Germany 

Sep 10 15:30 Italy  

Sep 11 00:30 Japan 

Sep 11 08:30 Holland 

Sep 11 09:10 Greece 

Sep 11 09:30 UK 

Sep 11 14:30 UK 

Sep 11 17:00 US 

Sep 12 09:10 Italy  

Sep 12 09:10 Sweden 

Sep 12 09:30 Germany 

Sep 12 09:30 Swiss 

Sep 12 14:30 Sweden 

Sep 12 17:00 US 

Sep 13 00:30 Japan 

Sep 13 09:10 Italy  

Sep 13 09:30 UK 

Sep 13 15:00 US 

Sep 13 17:00 US 

Sep 14 10:00 Belgium

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About:FX Empire Analyst - Barry Norman

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