The GBP/USD moved to the downside in the week ended August 5 after rising over the past three weeks as the S&P warning that the U.S. still may lose its top credit rating, record-high rise in Italian and Spanish bond yields and slowdown in global growth made the dollar more favorite for investors as a safe haven currency.
The tensions spreading in markets eroded demand on high-yielding currencies. In addition, the BoE left interest rate and APF unchanged, in line with market expectations, which increased predictions the BoE would leave loose monetary policy probably for next year to boost recovery that started to wane as seen by the most recent data which made expectations in favor of increase in APF rather than a rise in interest rate.
In theU.S., the situation is not better, as the world’s largest economy is receiving warnings from rating agencies that the AAA top rating is at risk, while the latest data also referred to a slowdown in growth which increased speculations the Fed will announce a third round of stimulus to reinvigorate the economy.
However, the non-farm payrolls report showed improvement as theU.S.economy added 117,000 jobs in July from 46,000 in June while unemployment slipped to 9.1% from 9.2%.
This week, eyes will be on the BoE minutes to know whether there is a change in the nine-panel members point of view after the latest data released, where the bank will determine September’s rate decision according to the latest growth and inflation forecasts due this week in August’s inflation report.
On the other hand, the main focus in theU.S.will be the on the FOMC rate decision which is, however, predicted to witness no change in the Fed’s monetary stance.
The release of the data this week will be as follows:
Monday August 8:
Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.
Tuesday August 9:
As of 08:30 GMT, theU.K.will release important data; manufacturing production for June is predicted to retreat to 0.2% from 1.8%, while visible trade deficit is estimated to narrow to 8100 million pounds from 8478 million pounds.
In the U.S., eyes will be on the FOMC rate decision , due 18:15 GMT, in case of any surprise from the Fed may announce a third round of stimulus to reinvigorate growth that started to slowdown after the end of QE2 in June, especially after the monetary interventions seen last week by the SNB, BoJ and ECB. Yet expectation refer to no change on monetary policy as the Fed will probably keep interest rate unchanged and will not announce new stimulus.
Wednesday August 10:
The awaited inflation report will be available at 09:30 GMT; thereafter, theUSwill release MBA mortgage applications for August 5 at 11:00 GMT followed by monthly budget statement at 18:00 GMT.
Thursday August 11:
At 12:30 GMT, the U.S economy will release trade balance report which is expected to show a narrowed deficit of $47.5 billion in June from $50.2 billion deficit a month earlier. At the same time, initial jobless claims for the week ended August 5 and continuing claims for the week ended July 30 will be available, while theU.K.lacks fundamentals.
Friday August 12:
The week ends with the release of some fundamentals from the U.S. which are retail sales for July, University of Michigan confidence for August and business inventories for June at 12:30 GMT, 13:55 GMT and 14:00 GMT respectively, while the U.K. lacks fundamentals.