By FXEmpire.com

Analysis and Recommendations:

The GBP/USD continues to decline, losing the battle against the USD. The greenback continues to trade with unbelievable strength as investors remain in risk aversion mode and shed anything European including currencies, equities and bonds. The GBP closed the European session at 1.6026

The pound is underperforming on the crosses despite a release of better than expected trade data. The deficit narrowed in March, and positive revisions were seen in the previous month as well. The weakness in GBP is likely the result of the upside surprise in EU GDP as investors reverse recent flows out of the EU. We believe that GBP benefits vs the EUR in times of turmoil as investors drive intra-European diversification flows.

Key events for GBP this week remain tomorrow’s quarterly inflation report from the BoE and employment data that are expected to show a slight deterioration with a rise in the unemployment rate to 8.4%

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which cover the current week and are published by Sunday before the new week begins.

Economic Reports May 15, 2012 actual v. forecast

EUR

French CPI (MoM)

0.1%

0.3%

0.8%

EUR

French GDP (QoQ)

0.0%

0.0%

0.1%

EUR

German GDP (QoQ)

0.5%

0.1%

-0.2%

EUR

German GDP (YoY)

1.7%

0.8%

1.5%

EUR

French Non-Farm Payrolls (QoQ)

0.1%

-0.2%

-0.1%

GBP

Trade Balance

-8.6B

-8.4B

-8.6B

EUR

GDP (QoQ)

0.0%

-0.2%

-0.3%

EUR

German ZEW Economic Sentiment

10.8

19.0

23.4

EUR

ZEW Economic Sentiment

-2.4

11.7

13.1

USD

Core CPI (MoM)

0.2%

0.2%

0.2%

USD

Core Retail Sales (MoM)

0.1%

0.2%

0.8%

USD

CPI (MoM)

0.0%

0.1%

0.3%

USD

Retail Sales (MoM)

0.1%

0.2%

0.7%

USD

NY Empire State MFG Index

17.1

8.5

6.6

USD

CPI (YoY)

2.3%

2.3%

2.7%

USD

Core CPI (YoY)

2.3%

2.3%

2.3%

USD

TIC Net Long-Term Transactions

36.2B

19.4B

10.1B

Upcoming Economic Events that affect the CHF, EUR, GBP and USD

May 16

09:30

GBP

Average Earnings Index +Bonus

1.0%

1.1%

09:30

GBP

Claimant Count Change

5.0K

3.6K

10:00

EUR

CPI (YoY)

2.6%

2.6%

10:00

EUR

Core CPI (YoY)

1.5%

1.6%

10:30

GBP

BoE Inflation Report

10:30

GBP

BoE Gov King Speaks

10:30

EUR

German 10-Year Bund Auction

1.770%

11:00

EUR

Portuguese Unemployment Rate

14.00%

13:30

USD

Building Permits

0.730M

0.764M

13:30

USD

Housing Starts

0.680M

0.654M

14:15

USD

Industrial Production (MoM)

0.6%

0.0%

15:00

EUR

ECB President Draghi Speaks

19:00

USD

FOMC Meeting Minutes

May 17

13:30

USD

Initial Jobless Claims

365K

367K

13:30

USD

Continuing Jobless Claims

3235K

3229K

15:00

USD

Philadelphia Fed Manufacturing Index

10.0

8.5

Government Bond Auctions (this week)

Date Time Country

May 16 08:50 France

May 16 09:10 Sweden

May 16 09:30 Germany

May 16 09:50 France

May 16 14:30 Sweden

May 17 08:30 Spain

May 17 15:00 US

May 17 17:00 US

Click here for further GBP/USD Forecast.

Originally posted here