GBP/USD Forecast Dec. 22, 2011, Fundamental Analysis

GBP/USD Forecast Dec. 22, 2011, Fundamental Analysis
GBP/USD Forecast Dec. 22, 2011, Fundamental Analysis
On Wednesday, the pound strengthened against the dollar with the improvement in the general sentiment and after upbeat U.K. data.

The market showed some improvement in the sentiment for the second day after the ECB offered 489 billion euros of three-year funds to 523 European banks, above estimtes of 310 billion euros, providing hopes the ECB would provide banks with the all the needed liquidity. 

On Tuesday, German business confidence unexpectedly advanced for the second month, where the business climate indicator surged to 107.2 in Dec. from 106.6 in November, while U.S., housing starts showed a rise to 685 thousands in Nov. from 627 thousands.

Also, a Spanish bond selling witnessed a rise in demand and decline in yield, where the main focus in the market is still on the latest developments in the euro area. 

On the other hand, U.K. data showed that budget deficit narrowed in Nov. as net borrowing excluding support for banks retreated to 18.1 billion pounds compared with 20.4 billion pounds a year earlier as the tax revenue advanced 7.1% while spending increased 0.8% from 0.5%.

From the U.K. also the minutes of Dec.’s rate decision showed that MPC members voted unanimously to keep both interest rate and stimulus steady at 0.50% and 275 billion pounds this month.

The minutes said “it was noted that market capacity made it difficult to increase the monthly rate of purchases substantially above what was already under way.”

It seems that after the increase the Asset Purchase Facility (APF) by 75 billion pounds in October, the MPC members decided to hold their monetary policy probably to see the impact of the program that will end in February, with the release of the February’s inflation report that will include the latest growth and inflation forecasts.

On Thursday, the U.K. will release 3q GDP final reading will be released at 09:30 GMT which is estimated to remain unrevised at 0.5% on the quarter and on the year. 

Also, in the U.S. the main focus will be on the main highlight of the week which is GDP annualized for the third quarter (third reading), which is predicted to remain unrevised at 2.0%, where it will be available at 13:30 GMT, while personal consumption will also linger at 2.3%.

Moreover, initial jobless claims for the week ending Dec. 9 and continuing claims for the week ending Dec. 18 will also be available at 13:30 GMT. Thereafter, at 14:55 GMT, University of Michigan confidence will show a rise to 68.0 in Dec. from the prior 67.7.

The pair is expected to be affected by the data due to its high relevance, yet it may also follow the general trend in the market which is focusing on the latest developments in the euro region.

Leave a Reply

Your email address will not be published. Required fields are marked *