GBP/USD Weekly Fundamental Analysis, October 19 – October 23, 2015 Forecast

Weekly Analysis and Recommendations:  The GBP/USD finished the week at 1.5436, up .0131 or 0.86%. The British Pound was primarily underpinned by the weaker U.S. Dollar which has been under pressure since the U.S. released a weaker-than-expected Non-Farm Payrolls report on October 2.

Economic conditions in the U.K. continued to show signs of a struggle with consumer inflation coming in at -0.1%. Average earnings came in at 3.0% versus a 3.1% estimate, but better than the previous 2.9% reading. The claimant count change was 4.6K versus an estimate of -2.3% and the last reading of 1.2k. The unemployment rate did dip to 5.4% from 5.5%.

This week’s price action will largely be driven by comments from Bank of England Governor Mark Carney and a slew of Fed speakers including Chair Janet Yellen on October 20. All are expected to address the timing of their respective interest rate hikes.

At its last meeting in September, the Fed refrained from an interest rate hike, citing concerns with the global economy and volatility in financial markets. Last week, comments from Fed officials suggested the central bank is in no hurry to raise rates. Most traders believe the Fed will continue to hold off on any rate hike until it is clear that a global slowdown, trouble in China and other international risks will not put the U.S. recovery off course.

BoE Governor Mark Carney is expected to address the mounting pressure to push prices up, given that the cost of goods in the U.K. has dropped to negative once again. He may also address the downside risks the economy is facing at this time including global concerns, especially surrounding China and other emerging markets. However, the domestic economy is also a major concern too. Recent PMI Services data showed business activity growing at its slowest pace for more than two years.

Next week, the GBP/USD could face renewed volatility because the price action is likely to be primarily news driven by the Fed speakers and Carney. Hawkish comments by Carney and dovish comments by the Fed members will likely underpin the Sterling. The market could swing both ways if Carney and the Fed speakers are both dovish. However, traders are more likely to show confidence in the U.S. Dollar, putting pressure on the British Pound.

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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