GBP/USD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast

Weekly Analysis and Recommendation: 

The GBP/USD broke recent highs against the US dollar touching 1.6668 to close at 1.6504 after traders sold off to book profits after BBA mortgages missed expectations. This week the risks are clearly biased to the upside. As the BoE mentioned in its January minutes earlier this week, “the recent strength of both the business surveys and employment growth pointed to above-trend growth around the turn of the year”. The BoE highlighted upside risks to its staff’s forecasts of “a little fewer than 1% per quarter in the fourth quarter of 2013 and the first quarter of 2014”. Indeed, PMI indices suggest activity rose by 1.2% QoQ in Q4, but they tend to overestimate actual growth numbers. We expect the recovery to have been broad-based across sectors and expenditure components. In particular, business investment likely rebounded for the second consecutive quarter, driven by the dissipation of uncertainty, higher business confidence, enterprises’ solid cash buffers and improved credit availability.

The Pound eased as headlines from a speech of BoE governor Carney flashed on the screens. The BoE governor provided several reasons why a drop of unemployment below 7.0% shouldn’t trigger an immediate rate hike. Amongst other he also hinted to an improved inflation outlook in the UK. Next month, the BoE will also evaluate how to adapt guidance to changing circumstances. Last but not least, the BoE governor mentioned the strengthening of sterling as one of the headwinds for the UK economy. From a market point of view, it is clear that Carney wants to keep interest rates low for longer, whatever the outcome of the 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.

 Historical: From 2011 to Present

Highest: 1.66.44 USD on Jan 24,2014

Average: 1.5764 USD over this period

Lowest: 1.4832 USD on Mar 12, 2013

Major Economic Events for the week of January 20 – 24 actual v. forecast for Euro, GPB, and USD

 

Economic Highlights of the coming week that affect the Euro, GBP and the USD