GBP/USD Fundamental Forecast – September 19, 2016

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Published: Sep 16, 2016, 11:55 UTC

The GBP/USD tumbled 78 points to 1.3163 as the greenback rallied ahead of the Federal Reserve meeting next week. Lower inflation and lackluster jobs

GBP/USD Fundamental Forecast – September 19, 2016

The GBP/USD tumbled 78 points to 1.3163 as the greenback rallied ahead of the Federal Reserve meeting next week. Lower inflation and lackluster jobs numbers and inaction by the BoE allowed the pound to fall most of the week. The only thing which investors will continue to pay attention to will be the economic data and any decisions made by the banks in the coming days. The market is not expecting a rate hike at this stage and if the Fed does increase the interest rate, the consequences could be dire.

Sterling, still the worst performer among major currencies since the Brexit vote, has outperformed all of its 16 major counterparts in the past month as reports from services to construction showed the UK economy was holding up better than some economists predicted.

Sterling’s hefty slide since Britain voted to leave the European Union should significantly narrow the country’s current account deficit, Bank of England policymaker Kristin Forbes said on Friday.

Speaking at a conference in Paris, Forbes said sterling’s 10 percent fall against the dollar and the euro was leading to some automatic adjustments to Britain’s current account deficit, one of the largest of any advanced economy.

“Sterling’s depreciation should improve the UK’s net foreign asset position by over 20 percent of GDP. That’s a big improvement in the UK’s net international asset position and that should alleviate concerns by international investors about the UK’s ability to pay on its net foreign asset position,” she said.

Forbes, an external member of the BoE’s Monetary Policy Committee, was speaking at a conference on rethinking capital controls and capital flows hosted by SUERF, a forum for European central banks, regulators and academics.

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