GBP/USD Fundamental Analysis Feb 2 , 2012, Forecast

Economic Events: (GMT)

09:30     GBP       Construction PMI                                                           52.9                        53.2

The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager’s Index (PMI) measures the activity level of purchasing managers in the construction industry. A reading above 50 indicates expansion in the construction industry; a reading below indicates contraction. It gives an indication about the health of the construction section in the UK. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. 

A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP                            

10:00    EUR       PPI (MoM)                                                                         -0.1%                     0.2%

The Producer Price Index (PPI) measures the change in the price of goods sold by manufacturers. It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation.

A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

13:30     USD       Nonfarm Productivity (QoQ)                                      1.0%                      2.3%     

Nonfarm Productivity measures the annualized change in labor efficiency when producing goods and services, excluding the farming industry. Productivity and labor-related inflation are directly linked-a drop in a worker’s productivity is equivalent to a rise in their wage.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.           

 13:30    USD       Initial Jobless Claims                                                    373K                      377K

 13:30    USD      Unit Labor Costs (QoQ)                                                  0.9%                      -2.5%                    

 13:30    USD      Continuing Jobless Claims                                          3565K                    3554K     

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week. Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance.       

Analysis and Recommendations:

The GBP/USD is currently trading at 1.5861 continuing to move up strong on positive UK data. Opening today at 1.5759

 The ADP jobs reports came in below forecast but still showed the addition of jobs in both the public and private sector. Employment in the U.S. nonfarm private business sector increased by 170,000 from December to January on a seasonally adjusted basis. The estimated advance in employment from November to December was revised down to 292,000 from the initially reported 325,000. Employment in the private, service-providing sector rose 152,000 in January.

 

In the UK, the Sterling strengthened  after data showed that the manufacturing sector in the U.K. expanded at the fastest pace in eight months in January, as output grew at the fastest rate in 10 months and new orders rose.

 

Housing prices and sales continued to drop. Which is not unexpected but still below forecast, which was still pretty negative.

 

Analysts from Oxford Economics, at the Institute for Fiscal Studies (IFS) briefing, have predicted that the UK economy will shrink in the current quarter. That would put Britain back into recession. Oxford Economics also warned that that eurozone crisis is casting a dark shadow over the global economy

The IFS is arguing that George Osborne should consider some form of fiscal stimulus in next month’s budget. The IFS said there was a “strong case” for Mr Osborne to forego medium-term tax or spending giveaways in his March Budget – though it said there might be scope for tax cuts equivalent to 2p off the main rate of income tax in future years if the economy develops favourably.

 

 

Today’s Economic Reports Results

GBP       Nationwide HPI (MoM)                     -0.2%                  -0.1%                     -0.2%      Unexpected Drop           

CHF        Retail Sales (YoY)                          0.6%                     1.6%                      1.8%       Unexpected Drop           

CHF        SVME PMI                                         47.3                       51.8                        49.1        Unexpected Drop

EUR        French Manufacturing PMI             48.5                        48.5                        48.5                                       

EUR        German Manufacturing PMI         51.0                       50.9                        50.9         Above Forecast              

 EUR       Manufacturing PMI                         48.8                       48.7                        48.7         Above Forecast              

 GBP      Manufacturing PMI                          52.1                       50.1                        49.7        Above Forecast               

 EUR       CPI (YoY)                                           2.7%                     2.7%                      2.7%

 

 

Scheduled Sovereign Bond Sales

 

Feb 01  15:30  Sweden  Details nominal bond auction on Feb 08

Feb 01  16:00  US

Announces details of 3Y Notes on Feb 07, 10Y Notes on Feb

08 & 30Y Bonds on Feb 09

Feb 02  09:50  France  OAT Auction

Feb 02  10.30  UK  Auctions 0.125% 2029