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Barry Norman
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GBP/USD Fundamental Analysis October 15, 2014 Forecast

Analysis and Recommendations:

The GBP/USD tumbled 129 points to trade at 1.5956 after inflation missed expectations and the BRC retail sales report printed well below forecast. Even UK PPI missed forecast casting a shadow on the UK recovery. Sterling took another hit from an unexpected fall in the BRC indicator of retail sales, down 2.1 per cent year on year compared with expectations of a 1.0 per cent rise.

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Concern over growth has already driven back expectations for a rise in UK interest rates well into next year. Some analysts who only weeks ago were talking up a rise next month are now admitting it may not come until the second half of next year.

Inflation is on something of a downward march at the moment, falling even further below the Bank of England’s target 2% rate to 1.2% in September, compared to 1.5% in August. That’s the lowest level since September 2009 and a far cry from three years ago when it hit 5%.

Traders bet that the Bank of England will wait longer than previously expected to raise interest rates from their record, 67-month low of 0.5%.

The pressure does increasingly look like it’s easing on Mark Carney and the Monetary Policy Committee, particularly as falling inflation will be a welcome respite to the average worker, with real wage growth stagnating

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.

Today’s economic releases actual vs. forecast:

 

Cur.

 

Event

Actual

Forecast

Previous

 

  GBP

 

BRC Retail Sales Monitor (YoY) (

-2.1%

1.0%

1.3%

 

 

  AUD

 

NAB Business Confidence (Sep)

5

 

7

 

 

  EUR

 

French CPI (MoM) (Sep)

-0.4%

-0.3%

0.4%

 

 

  EUR

 

French HICP (MoM) (Sep)

-0.4%

-0.3%

0.5%

 

 

  EUR

 

Spanish CPI (MoM) (Sep)

0.2%

0.2%

0.2%

 

 

  EUR

 

Italian CPI (MoM) (Sep)

-0.4%

-0.3%

-0.4%

 

 

  GBP

 

CPI (MoM) (Sep)

0.0%

0.2%

0.4%

 

 

  GBP

 

CPI (YoY) (Sep)

1.2%

1.4%

1.5%

 

 

  GBP

 

PPI Input (MoM) (Sep)

-0.6%

-0.4%

-1.2%

 

 

  EUR

 

German ZEW Conditions (Oct)

3.2

18.0

25.4

 

 

  EUR

 

German ZEW Sentiment (Oct)

-3.6

1.0

6.9

 

 

  EUR

 

Industrial Production (MoM)

-1.8%

-1.6%

0.9%

 

 

  EUR

 

ZEW Economic Sentiment

4.1

7.1

14.2

 

 

Upcoming Economic Events that you should be monitoring:

 

Cur.

 

Event

Actual

Forecast

Previous

Wednesday, October 15

 

  CNY

 

CPI (YoY) (Sep)

 

1.7%

2.0%

 

 

  EUR

 

ECB President Draghi

 

 

 

 

 

  GBP

 

Claimant Count Change

 

-35.0K

-37.2K

 

 

  USD

 

Core Retail Sales (MoM)

 

0.3%

0.3%

 

 

  USD

 

PPI (MoM) (Sep)

 

0.1%

0.0%

 

 

  USD

 

Retail Sales (MoM)

 

-0.1%

0.6%

 

 

  EUR

 

ECB President Draghi  

 

 

   

Government Bond Auction

Date Time Country Auction

Oct 14 08:30 Spain 6 & 12M T-bill auction

Oct 14 09:30 Belgium 3 & 12M T-bill auction (Jan & Oct 2015)

Oct 15 09:03 Sweden Bond auction

Oct 15 09:30 Germany Eur 4.0bn Sep 2016 Schatz auction

Oct 16 08:30 Spain Bono/Obligacion auction

Oct 16 09:30 UK Auctions 0.125% 2024 I/L Gilt

Oct 16 15:00 US Announces details of 30Y TIPS auction on Oct 23

 

 

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