GBP/USD Fundamental Analysis – November 9, 2015 – Forecast

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Published: Nov 6, 2015, 14:21 UTC

Analysis and Recommendations: The GBP/USD fell to 1.5061 down 147 points after the US dollar surged to its highest level in months after the Nonfarm

GBP/USD Fundamental Analysis – November 9, 2015 – Forecast

Analysis and Recommendations:

The GBP/USD fell to 1.5061 down 147 points after the US dollar surged to its highest level in months after the Nonfarm payroll report jumped higher than ever expected. The dollar is trading well above 99 and climbing as it is most likely that the Fed will raise interest rates in December.

The Bank froze rates at 0.5 per cent again yesterday with Ian McCafferty the only member of the nine-strong monetary policy committee voting for a hike. It said inflation, running at minus 0.1 per cent, would return to the 2 per cent target ‘in around two years’ if rates rose as expected by markets.

The forecasts appeared to endorse the view that rates would stay on hold all of next year and rise to 0.75 per cent in early 2017. Governor Mark Carney said the Bank would not consider unwinding its £375bn quantitative easing program until rates hit 2 per cent – something not expected until the end of the decade.

The Bank’s forecast contrasted with the tone of US Federal Reserve chairman Janet Yellen, who this week said American rates could rise in December.

UK rates last rose in July 2007, from 5.5 per cent to 5.75 per cent, before falling in the financial crisis, reaching an historic low of 0.5 per cent in March 2009.

Analysts said the dovish signals from the BoE, which flagged risks to UK growth from external developments, showed it was growing increasingly edgy about the currency’s recent strength.

“The BoE has ticked all boxes suggesting that it does not like sterling strength. We see potential for GBPUSD to trade down to $1.48,” Morgan Stanley analysts said in a note.

“Carney linked UK disinflation risks to sterling strength, commodity weakness and Asia’s economy showing additional signs ..

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Today’s economic releases:

Cur.	Event	Actual	Forecast	Previous
GBP	BoE Gov Carney Speaks
AUD	Monetary Policy Meeting Minutes
JPY	BoJ Governor Kuroda Speaks
EUR	German Industrial Production (MoM)	-1.1%	0.5%	-0.6%
GBP	Industrial Production (MoM) (Sep)	-0.2%	-0.1%	0.9%
GBP	Manufacturing Production (MoM)	0.8%	0.4%	0.4%
GBP	Trade Balance (Sep)	-9.35B	-10.60B	-10.79B
GBP	Trade Balance Non-EU (Sep)	-2.08B	-3.30B	-3.84B
USD	FOMC Member Bullard Speaks
USD	Average Hourly Earnings (MoM) (Oct)	0.4%	0.2%	0.0%
USD	Nonfarm Payrolls (Oct)	271K	180K	137K
USD	Participation Rate (Oct)	62.4%		62.4%
USD	Private Nonfarm Payrolls (Oct)	268K	165K	149K
USD	Unemployment Rate (Oct)	5.0%	5.1%	5.1%