GBP/USD Weekly Fundamental Analysis – March 21-25, 2016 -Forecast

The GBP/USD saw gains this week of 0.67% to close at 1.4484 inspired by weakness in the greenback after the dovish stance of the FOMC. Brexit worries limited the pounds rise. Despite expectations for a 1.0% decline in U.K. Retail Sales, stickiness in the core Consumer Price Index may heighten the appeal of the British Pound and generate a larger recovery in GBP/USD as the BoE argues that the next move will be to normalize monetary policy.

The U.K. referendum is likely to keep the Monetary Policy Committee on the sidelines throughout the first-half of 2016 as the board votes unanimously to retain the current policy in March, but signs of stronger-than-expected price growth may encourage Governor Mark Carney to adopt a more hawkish tone over the coming months especially as the central bank sees a risk of overshooting the 2% inflation-target over the policy horizon. The Bank of England expects the economy to grow 2.2% this year and 2.3% next year, more optimistic than the UK government’s forecasts for 2% and 2.2% growth in 2016 and 2017. Financial markets had fully priced out the possibility of an interest rate hike this year.

At the same time, the recent weakness in the greenback may contribute to a further appreciation in GBP/USD as the Federal Reserve cuts its growth and inflation forecast, with central bank officials laying out a more gradual path for future interest rates. Even though the U.S. economy approaches ‘full-employment,’

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.

Major Economic Events for the week:

 

Upcoming Government Bond Auctions

Date Time Country 

Mar 21 11:00 Belgium OLO auction – CANCELLED

Mar 21 11:30 Germany Eur 1.5bn Mar 2017 Bubill

Mar 21 17:20 Italy Details of Zero-coupon/BTPei auction

Mar 22 10:00 Netherlands Holds bond auction

Mar 23 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Mar 23 17:20 Italy Details of bond auction

Mar 23 17:20 Sweden Details of bond auction on Mar 30

Mar 23 16:30 US Holds 2-year FRN auction

Mar 24 11:10 Italy Holds zero-coupon/BTPei auction