GBP/USD Fundamental Analysis April 5, 2012, Forecast

By FXEmpire.com

Analysis and Recommendations:

REMEMBER, MOST GLOBAL MARKETS ARE CLOSED ON FRIDAY APRIL 6, 2012 AND MANY ARE CLOSED ON MONDAY APRIL 9, 2012 ALSO. VOLUME WILL BE LIGHT AND TRADERS WILL BE POSITIONING THEMSELVES FOR THE LONG HOLIDAY WEEKEND. ECONOMIC REPORTS WILL CONTINUE TO BE RELEASED ON FRIDAY, IN THE US THE NON FARMS PAYROLL REPORTS WILL BE ISSUED ON FRIDAY

The GBP/USD is currently down with the sterling selling for 1.5881, after breaking and maintaining the 1.60 level, the strength of the greenback was able put pressure on all of its trading partners after the release of the FOMC minutes, which showed that the Fed has no interest at additional bond purchases or monetary easing.

The sterling was also supported with some unexpected positive economic news today. The final reading of the Markit euro-zone composite purchasing managers index, or PMI, for March rose from a preliminary estimate but still pointed to a contraction in business activity in the 17-nation region last month and over the first.

A gauge of activity in Britain’s dominant services sector unexpectedly rose in March, data showed Thursday. The CIPS/Markit purchasing managers’ index, or PMI, for the sector rose to 55.3 from a reading of 53.8 in February. Chris Williamson of Markit said that the strength of the economy as reflected in these surveys would stay the BOE MPC’s hand on further asset purchases in coming months. “PMI data signaled that UK economic growth picked up in March to round off the strongest quarter for a year. The surveys therefore indicate that the UK economy has escaped a slide back into recession, and also suggest that the Bank of England will hold off on further asset purchases unless the economic situation deteriorates in coming months”.

Williamson said that the upturn in business confidence in both construction and service sectors bodes well for future growth, though he warned that soft underlying order books might weigh on manufacturing. The Queen’s Jubilee celebrations could also be expected to dampen GDP growth, Williamson said.

“There remains a strong risk that, unless business activity picks up further, the economy could contract again in the second quarter. Despite this, the strengthening of the economy in March suggests that the Bank of England’s Monetary Policy Committee will leave policy unchanged and is likely to revise up its growth forecast in the spring Inflation Report. Further quantitative easing is only likely if the economic data turn down meaningfully in coming months.”

The USD was further supported a labor market report showing improvement at a moderate pace, with private payrolls in March notching more than two years of gains, according to a monthly report released Wednesday by payrolls-processor Automatic Data Processing Inc.

Despite the moderate pace of the recovery, there were many reasons to be optimistic about the outlook, Treasury Secretary Timothy Geithner said Wednesday. In a speech to The Economic Club of Chicago, Geithner said that the economy was “making a lot of progress” working down excess debt. Household debt is down 17 percentage points relative to income since before the crisis, Geithner said. At the same time, financial sector leverage is down “substantially” and credit is expanding, he said. The challenge facing the American economy is not primarily about the health of the business community.

The number of mortgage applications filed in the U.S. last week rose 4.8% from the prior week, the Mortgage Bankers Association said Wednesday, as re-financings picked up following six straight weeks of declines

Economic Events April 4, 2012 actual v. forecast

AUD	Trade Balance	-0.48B	1.00B	-0.97B
GBP	Halifax House Price Index (MoM)	2.2%	-0.3%	-0.4%
GBP	Services PMI	55.3	53.5	53.8
EUR	Retail Sales (MoM)	-0.1%	0.1%	1.1%
EUR	German Factory Orders (MoM)	0.3%	1.2%	-1.8%
PLN	Polish Interest Rate Decision	4.50%	4.50%	4.50%
EUR	Interest Rate Decision	1.00%	1.00%	1.00%
USD	Treasury Secretary Geithner Speaks
RUB	Russian CPI (MoM)	0.6%	0.5%	0.4%
USD	ADP Nonfarm Employment Change	209K	200K	230K
EUR	ECB Press Conference
USD	ISM Non-Manufacturing Index	56.0	57.0	57.3

Economic Events scheduled for April 5, 2012 that affect the European and American Markets

08:15 CHF CPI (MoM) 0.4% 0.3%

The Consumer Price Index (CPI) measures the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

08:30 EUR Dutch CPI (YoY) 2.50%

Consumer Price index is the most frequently used indicator of inflation and reflect changes in the cost of acquiring a fixed basket of goods and services by the average consumer. The weights are usually derived from household expenditure surveys.

09:30 GBP Industrial Production (MoM) 0.3% -0.4%

09:30 GBP Manufacturing Production (MoM) 0.1% 0.1%

Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. Manufacturing Production measures the change in the total inflation-adjusted value of output produced by manufacturers. Manufacturing accounts for approximately 80% of overall Industrial Production.

12:00 GBP Interest Rate Decision 0.50% 0.50%

12:00 GBP BOE QE Total 325B 325B

Bank of England (BOE) monetary policy committee members vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.The Bank of England electronically creates new money and uses it to purchase gilts from private investors such as pension funds and insurance companies. A higher than expected reading should be taken as negative/bearish for the GBP , while a lower than expected reading should be taken as positive/bullish for the GBP.

13:30 USD Initial Jobless Claims 355K 359K

13:30 USD Continuing Jobless Claims 3350K 3340K

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week. Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance. Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week.

15:00 GBP NIESR GDP Estimate

The National Institute of Economic and Social Research (NIESR) gross domestic product (GDP) Estimate measures the change in the estimated value of all goods and services produced by the economy during the previous three months. The NIESR estimates GDP data on a monthly basis in an effort to predict the quarterly government-released data.

Government Bond Auctions (this week)

Apr 04 14:30 Sweden Details T-bill auction on Apr 11

Apr 05 08:50 France OAT auction

Apr 05 15:00 US Announces auctions

Apr 05 15:30 Italy Details BOT on Apr 11 & BTP/CCTeu on Apr 12

Originally posted here