GBP/USD Weekly Fundamental Analysis, November 16 – November 20, 2015 Forecast

Weekly Analysis and Recommendations: 

The GBP/USD rebounded from the previous week’s sell-off to post a higher close last week at 1.5234. This put the Sterling up 0.0188, or 1.25%. The catalysts behind the rally were a mixed U.K. labor report, short-covering ahead of this week’s U.K. inflation data and generally oversold technical conditions.

Early in the week, the GBP/USD was hit by renewed selling pressure from the previous week’s dovish Super Thursday statement from the Bank of England and the stronger-than-expected U.S. Non-Farm Payrolls report which raised the odds of a Fed interest rate hike in December from 30% to 70%. There was even talk the previous week of additional stimulus.

The Forex pair began to pick up strength after the release of the U.K. labor report. It showed that Average Earnings rose 3.0%, slightly below expectations. The Claimant Count Change was 3.3K versus the estimate of 1.6K. The unemployment rate declined slightly to 5.3% from 5.4%. Traders were disappointed with the wage growth, but the drop in the unemployment rate was encouraging. Nonetheless, sellers shied away from pressuring the market.

Also helping to trigger the short-covering were comments from BoE Chief Economist Andrew Haldane who said that looser policy was not his “central view”.  This was probably the most bullish statement he could make. It was strong enough to trigger an acceleration to the upside.

This week’s key report will be Tuesday’s U.K. inflation data. Traders are looking for year-to-year CPI to come in at -0.1%. Core CPI is expected to show a reading of 1.0%. Later in the week, the U.K. will also report on retail sales. This report may give investors a quick peek at future growth.

This week, investors will get the opportunity to react to the latest U.S. consumer inflation data. Month-to-month core inflation is expected to rise 0.2%, or 1.9% annually. This will put it just under the Fed’s benchmark target of 2.0%. However, next month, the figure may rise to 2.0% or higher because last year’s steep drop in crude oil prices will start to be filtered out of the inflation equation. 

Also on-tap on Wednesday, November 18 are the minutes of the last Fed meeting. Hawkish minutes are likely to put some pressure on the GBP/USD because they will highlight the divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Bank of England. 

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:

            Date                      Time               Curr                                     Event                                                Forecast  Previous