GBP/USD Forecast Dec. 8, 2011, Fundamental Analysis

On Wednesday trading, amid the absence of data from the U.S. economy, the pair showed fluctuations, where the pound pared its earlier advance after a report showing more than expected contraction in U.K. manufacturing on the back of the euro-area debt crisis.

U.K. manufacturing production plunged 0.7% in October compared with the revised 0.1% advance in September.

However, the pair showed fluctuation, tracking the general sentiment which has been following the latest announcements from European leaders before this week’s summit.

The general sentiment in markets remained mixed on hopes European leaders will succeed in this week’s summit in shoring up their economies and calming down markets while concerns after S&P downgrade warning remained to have negative impact on investor’s risk appetite.

Both German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a proposal that would put strict budget discipline to be discussed by other members in the summit this week.

On Thursday, the awaited BoE rate decision will be announced at 12:00 GMT; however, forecasts refer to no change in the bank’s monetary policy as policy makers are expected to keep both interest rate and APF quantity at 0.50% and 275 billion pounds.

Investors will track the decision carefully as the BoE to see whether the bank will expand the program or wait till its end in Feb.

On the other hand, at 13:30 GMT, the U.S economy will release initial jobless claims for the week ended Dec. 2 and continuing claims for the week ended Nov. 25 will be available. Then, Wholesale inventories will be out at 15:00 GMT.

The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest developments in the euro region with eyes on the EU summit.

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