GBP/USD Weekly Fundamental Analysis, August 17 – August 21, 2015 Forecast

Weekly Analysis and Recommendations: 

The British Pound rose against the U.S. Dollar last week on relatively light volume. Most of the price action was attributed to position-adjustments by short-sellers reducing their bets for a September interest rate hike by the U.S. Federal Reserve. Comments from Federal Reserve vice chairman Stanley Fischer early in the week led to a shift in investor sentiment which underpinned the GBP/USD.

Inflation data from the U.K. and U.S. will be watched closely this week. On Tuesday, U.K. consumer inflation is expected to remain flat with a reading of 0.0%. In June, the inflation index fell to 0% from 0.1% the prior month due to lower clothing and food prices. According to the Bank of England, consumer inflation is expected to remain low over the near-term, but it expects it to pick up by the end of the year. The BoE is counting on rising wages to lead to increased consumption which should exert upward pressure on inflation. Like the Fed, the BoE would like to see improving labor and inflation data.

Wednesday could produce the most volatile reactions to reports with the release of the U.S. consumer inflation report and the latest Fed minutes. U.S. consumer inflation is expected to show an increase of 0.2%. In June, it showed a reading of 0.3%. Lower energy prices are being blamed for the decline. This report is important because it is a major component in the Fed’s decision process as to whether to raise rates in September or refrain. The Fed minutes are expected to reveal how wide the gaps are between the hawks and the doves, and how real a September rate hike is. 

Look for the short-covering rally to continue if the U.S. consumer inflation figure misses its mark. Sentiment for a rate hike in September may already be shifting because the surprise devaluations by the People’s Bank of China have created financial market instability. This should also be favorable to the GBP/USD over the near-term.

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.

Important Reports to Watch This Week:

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