GBP/USD Fundamental Analysis – Forecast for the week of September 19, 2016

The GBP/USD tumbled on comments from BoE Carney and the banks decision to hold fire at its meeting on Thursday. The pound closed the week at 1.3001 and is a strong sell moving into the new week. The pair is down 2% for the week and almost 12% on a year to date basis.

It was widely anticipated that the BoE would keep its monetary stance unchanged due to which there was no drastic volatility in the market. If we observe carefully, on 13th and 14th Sep’16, GBPINR was trading at lower levels and trading volumes were light too as disappointing inflation and employment data from Britain dented the investor sentiment. However, situations have changed after the result of BoE monetary policy review where the policymakers kept the borrowing rates unchanged and hinted at the possibility of future rate cuts in 2016.

The increase in consumer spending has not only improved the inflation rate but has also helped other sectors of Britain to gain strong footing. Manufacturing, service and construction sectors have revived owing to sudden upsurge in the solid inflows of new work from both domestic and export sources, the latter aided by the sterling exchange rate. Furthermore, stronger demand, product launches and clients committing to new and previously postponed contracts have worked in favor for the Britain’s economy. After the Brexit catastrophe, property shares had plunged which forced a series of funds in the sector to halt trading. However, now the real estate market is slowly regaining confidence. Business investments have also got a boost. All the above factors have kept the GDP growth rate unchanged at 0.6 percent for quarter ending Jun’16 in spite of the Brexit catastrophe.

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This Week’s Economic Events That You Should Be Monitoring:

Date Country Name Volatility Previous
9/20/2016 AUD RBA Meeting’s Minutes 3
9/20/2016 CAD BoC Governor Poloz 3
9/21/2016 AUD Mid-Year Economic Outlook 3
9/21/2016 JPY BoJ Interest Rate Decision 3 -0.1
9/21/2016 JPY BoJ Monetary Policy Statement 3
9/21/2016 JPY BoJ Press Conference 3
9/21/2016 USD FOMC Economic Projections 3
9/21/2016 USD Fed’s Monetary Policy Statement 3
9/21/2016 USD Fed Interest Rate Decision 3 0.5
9/21/2016 USD FOMC Press conference 3
9/21/2016 NZD RBNZ Interest Rate Decision 3 2
9/22/2016 EUR ECB President Draghi’s Speech 3
9/23/2016 AUD RBA’s Governor Lowe Speech 3

Government Bond Auctions

Date Time           Country               Auction

Sep 19 11:00 Belgium Eur 2.8-3.5bn 4.5% Mar 2026,

Sep 20 11:30 UK Gbp 2.5bn 1.5% Jul 2047 Gilt

Sep 21 10:30 Denmark Holds bond auction

Sep 21 11:03 Sweden Sek 2bn 4.25% Feb 2019 & Sek 1.5bn 1.5% Nov 2023 bonds

Sep 21 11:30 Germany Eur 4bn 0% Oct 2021 Bobl

Sep 22 17:20 Italy Announces details of bond auction

Sep 22 19:00 US Usd 11bn 0.125% Jul 2026 TIP

Sep 26 11:30 Germany Eur 1.5bn Sep 2017 Bubill

Sep 26 13:00 Norway Details of bond auction on Sep 28

Sep 27 11:00 Netherlands Eur 0.75-1.25bn 4% Jan 2037 DSL

Sep 27 11:10 Italy Holds zero coupon/BTP€i auction

Sep 28 11:05 Norway Holds bond auction

Sep 28 11:30 Germany Eur 4bn Sep 2018 Schatz

Sep 29 11:03 Sweden Holds I/L bond auction