GBP/USD Weekly Fundamental Analysis, August 10 – August 14, 2015 Forecast

Weekly Analysis and Recommendations: 

Disappointing news from the Bank of England monetary policy committee meeting on August 6 drove the GBP/USD to fresh monthly lows. The British Pound weakened further on Friday following the release of the July U.S. Non-Farm Payrolls report. Both the decision and the report affected interest rates differently. The BoE decision called for interest rates to remain at historical lows while the jobs report stirred up the possibility of a September rate hike. With U.K. and U.S. interest rates moving in opposite directions, the interest rate differential favored the Greenback, making it a more attractive investment at the end of the week.

The sideways price action by the GBP/USD suggests that since July 10 there has been growing support for a BoE interest rate hike by the end of the year. Traders and analysts were hoping that with the August meeting, at least two MPC members would vote in favor of raising rates. They were disappointed with the results of this past week’s BoE decision that showed only one member voting in favor of a rate hike.

The results didn’t completely eliminate expectations of a rate hike. The price action in the Sterling and U.K. interest rate markets showed that investors are now predicting a rate hike for mid-2016. Although the GBP/USD may drift sideways-to-lower into the end of the year, it is still important to watch for surprises in economic data linked to employment and inflation because any positive jump in these two key areas may increase the odds of an earlier-than-expected rate hike.

The focus this week will be on the U.K. Jobless Claims figures on Wednesday, August 12. All economic reports deal with employment and inflation will be extremely important going into the end of the year because BoE Governor Mark Carney told us that interest rate policy will be data dependent. From the U.S. point of view, Monday’s FOMC member speeches could shake up volatility if they discuss the timing of the first Fed rate hike since 2006. On Wednesday, traders are also likely to react to the U.S. Retail Sales data.

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.

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