GBP/USD Weekly Fundamental Analysis September 3-7, 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 opened the week at 1.58 and closed the week at 1.5866 as the pair just responded to the strength of the US dollar and the hopes of stimulus from the Feds. Mid week when Mr. Draghi withdrew from the Jackson Hole event the Euro soared weakening the USD and allowing the pound to trade up. There was virtually no data or news from the UK this week as market focus was elsewhere.

Date

Last

Open

High

Low

Change %

Aug 31, 2012

1.5866

1.5788

1.5896

1.5778

0.50%

Aug 30, 2012

1.5787

1.5826

1.5875

1.5772

-0.25%

Aug 29, 2012

1.5826

1.5825

1.5855

1.5803

0.01%

Aug 28, 2012

1.5825

1.5791

1.5836

1.5754

0.22%

Aug 27, 2012

1.5791

1.5800

1.5829

1.5788

-0.06%

Last week also saw the release of some fairly horrible trade numbers. While the data can be volatile from one month to the next, a £10bn short-fall on the goods/services balance in the UK is certainly troublesome. The widening was driven by a weakening of exports to non-EU markets. This is particularly troublesome as it seems imperative that the UK shifts its export focus away from Europe given demand looks set to remain in the doldrums for some considerable time. King also noted that GBP strength was hindering the rebalancing of the economy, with EUR/GBP of particular concern. Contrary to our expectations, EUR/GBP slipped back last week as the EUR struggled against a wide range of currencies. While there’s obviously not a lot that the Monetary Policy Committee (MPC) can do about EUR weakness, they can influence that yield differential – the relatively high UK base rate may be supporting GBP vs the EUR. While there looks to be other drivers, continued declines in EUR/GBP may see the MPC change its stance on the base rate. We doubt we are alone in this view, so market yields may provide a natural cap on EUR/GBP downside. 

Britain’s central bank will expand its quantitative-easing program to 425 billion pounds later this year from 375 billion pounds, the London-based BCC wrote in a report yesterday. Officials will hold it at that level until early 2014 when they start to raise the key interest rate, it said.

A report by the British Retail Consortium will show retail sales fell 0.5 percent, after July’s 0.1 percent gain, according to the median prediction of five economists surveyed by Bloomberg before the Sept. 4 report. The Bank of England is due to announce its latest policy decision two days later.

The pound rose 0.3 percent in the week extending its gain this month to 1.2 percent. Against the euro, it slipped 0.1 percent to 79.21 pence, down 1.1 percent in August. 

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.

Tier 1 and 2 Economic Releases for August 27-31, 2012

Date

Currency

Event

Actual

 

Forecast

Previous

Aug. 27

SEK

Swedish Retail Sales (MoM) 

0.30%

 

0.20% 

-0.30% 

 

EUR

German Ifo Business Climate Index 

102.3

 

102.6 

103.2 

 

EUR

German Current Assessment 

111.2

 

110.8 

111.5 

 

EUR

German Business Expectations 

94.2

 

95.0 

95.5 

Aug. 28

AUD

HIA New Home Sales (MoM) 

-5.6%

 

 

2.8% 

 

EUR

GfK German Consumer Climate 

5.9

 

5.9 

5.9 

 

USD

CB Consumer Confidence 

60.6

 

66.0 

65.4 

Aug. 29

AUD

Construction Work Done (QoQ) 

-0.2%

 

1.0% 

7.8% 

 

CHF

KOF Leading Indicators 

1.57

 

1.50 

1.41 

 

EUR

German CPI (MoM) 

0.3%

 

0.2% 

0.4% 

 

USD

GDP (QoQ) 

1.7%

 

1.7% 

1.5% 

 

USD

Pending Home Sales (MoM) 

2.4%

 

1.0% 

-1.4% 

 

USD

Beige Book 

 

 

 

 

 

NZD

Building Consents (MoM) 

2.0%

 

3.0% 

5.7% 

Aug. 30

JPY

Retail Sales (YoY) 

-0.8%

 

-0.2% 

0.2% 

 

AUD

Building Approvals (MoM) 

-17.3%

 

-5.0% 

-1.0% 

 

AUD

Private New Capital Expenditure (QoQ) 

3.4%

 

2.4% 

7.7% 

 

EUR

German Unemployment Change 

9K

 

8K 

9K 

 

USD

Core PCE Price Index (MoM) 

0.0%

 

0.1% 

0.2% 

 

CAD

Current Account 

-16.0B

 

-15.0B 

-10.2B 

 

USD

Personal Spending (MoM) 

0.4%

 

0.4% 

0.0% 

 

USD

Initial Jobless Claims 

374K

 

370K 

374K 

 

USD

Continuing Jobless Claims 

3316K

 

3307K 

3321K 

Aug. 31

KRW

South Korean Industrial Production (YoY) 

0.3%

 

0.5% 

1.4% 

 

JPY

Unemployment Rate 

4.3%

 

4.3% 

4.3% 

 

JPY

Tokyo Core CPI (YoY) 

-0.5%

 

-0.6% 

-0.6% 

 

JPY

Industrial Production (MoM) 

-1.2%

 

1.7% 

0.4% 

 

GBP

Nationwide HPI (MoM) 

1.3%

 

0.1% 

-0.8% 

 

EUR

CPI (YoY) 

2.6%

 

2.5% 

2.4% 

 

EUR

Unemployment Rate 

11.3%

 

11.3% 

11.3% 

 

CAD

GDP (MoM) 

0.2%

 

0.1% 

0.1% 

 

USD

Chicago PMI 

53.0

 

53.5 

53.7 

 

USD

Michigan Consumer Sentiment 

74.3

 

73.6 

73.6 

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 for the upcoming week… Tiers 3 keep your eyes on these

Date

Time

Currency

Event

Forecast

 

Previous

 

 

Sep. 04

05:30

AUD

Interest Rate Decision 

3.50% 

 

3.50% 

 

 

 

15:00

USD

ISM Manufacturing Index 

50.0 

 

49.8 

 

 

Sep. 05

02:30

AUD

GDP (QoQ) 

0.8% 

 

1.3% 

 

 

 

14:00

CAD

Interest Rate Decision 

1.00% 

 

1.00% 

 

 

Sep. 06

02:30

AUD

Employment Change 

5.0K 

 

14.0K 

 

 

 

02:30

AUD

Unemployment Rate 

5.3% 

 

5.2% 

 

 

 

12:00

GBP

Interest Rate Decision 

0.50% 

 

0.50% 

 

 

 

12:45

EUR

Interest Rate Decision 

0.75% 

 

0.75% 

 

 

Sep. 07

15:00

CAD

Ivey PMI 

58.0 

 

62.8 

  

Government Bond Auction

Date  Time  Country 

Sep 03  09:10  Norway  Bond auction

Sep 03  10:00  Belgium  OLO auction

Sep 04  00:30  Japan  Auctions 10Y JGBs

Sep 04  09:15  Austria  Bond auction

Sep 04  09:30  Belgium  Auctions Dec 2012 (3M) & Feb 2013 (6M) T-bills

Sep 04  14:30  UK  Details 0.75% 2034 I/L Gilt & 1.75% Sep 2022 Gilt on Sep

Sep 05  09:10  Sweden  Nominal bond auction

Sep 05  09:30  Germany  Eur 5.0bn Sep 2022 Bund auction

Sep 05  09:30  UK  4.5% 2042 Gilt auction

Sep 06  00:30  Japan  Auctions 30Y JGBs

Sep 06  08:30  Spain  Bono auction

Sep 06  08:50  France  OAT auction

Sep 06  09:10  Sweden  I/L bond auction

Sep 06  15:00  US  Announces 3Y Notes on Sep 11, 10Y Notes on Sep 12 &

Sep 07  15:30  Italy

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About:FX Empire Analyst - Barry Norman

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