GBP/USD Monthly Fundamental Forecast August 2014

Outlook and Recommendation

The GBP/USD eased at the end of the month to 1.6877 as UK data disappointed and the US dollar climbed. The fundamentals in the UK are strong and the Bank of England (BoE) is expected to be the first of the G4 central banks to enter its interest rate hiking cycle, which has supported the GBP’s year-long rally. However, the upward trend is being tested, and bullish CFTC sentiment appears to be fading. In addition, consensus forecasts suggest a weakening bias into 2015. Near-term risks have shifted to the downside; nevertheless, this is likely to prove temporary and we hold a Q3 2014 target of 1.73.

The UK economy has continued to expand at a very respectable pace. Consumer spending remains the primary driving force, thanks mainly to the combination of a falling savings ratio, coupled with super-strong employment growth helping to buoy disposable income growth. Meanwhile, investment is very strong but net exports are sluggish due to a lack of import demand from the UK’s main trading partner, the Eurozone. While we estimate a lot of the momentum in growth has been maintained into the second quarter and beyond,

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.

Central Bank Name: The Bank of England

Date of next meeting: August 07, 2014

Current Rate: 0.50%

Economic events for the month of August affecting EUR, GBP and USD