By FXEmpire.com
Outlook and Recommendation
The GBP/USD is falling, having broken the 1.62 level this month. The pair is now trading at the end of May at 1.5397
Sterling lost 5% in May on the back of a jump higher in risk aversion, deterioration in domestic data and rising expectations that the Bank of England’s Monetary Policy Committee will entertain another round of asset purchases (QE). Once risk aversion subsides the outlook for GBP should brighten as it benefits from flows into its Triple-A rated bond market, the UK’s credible fiscal plan and the likelihood that even a dovish BoE will prove more hawkish than the other G4 central banks. We expect GBPUSD to close the year at 1.60.
The UK’s weak fundamental outlook finally caught up with the currency as market sentiment collapsed in May. We have lowered our profile for the GBP through 2013, though the trajectory remains upward sloping. The preliminary figure for first-quarter GDP (the second of three estimates) was revised lower, from -0.2% q/q to -0.3%, with the sectoral breakdown showing that weakness was concentrated in inventory investment and net exports. Available data for the second quarter point to continued fragility (though we do not foresee another negative print). The manufacturing PMI sunk nearly five points in May to 45.9, a three-year low. The services sector PMI most likely also dipped in May (from 53.3 in April), and key for monetary policy will whether it lands above or below the neutral 50-mark. We have adjusted lower our growth expectation for this year and next to 0.4% and 1.7%, respectively. The Bank of England (BoE) left policy conditions unchanged at the May meeting.
At the end of May the US fundamentals were weakening but the strength of the USD was very strong, due to the risk aversion mode of the markets. It was not until a week that that investors shifts from the USD to gold, but back again. The US seems to be entering a spring stall, which will allow the GBP to gain momentum.
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.
Central Bank
Central Bank Name: Bank of England
Date of next meeting or last meeting: Jun 07
Current Rate: 0.50 % (- 0.50) at the time of this writing the BoE met and held rates.
Statement highlights of last meeting: The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its program me of asset purchases totaling ?325 billion financed by the issuance of central bank reserves. The previous change in Bank Rate was a reduction of 0.5 percentage points to 0.5% on 5 March 2009. A programme of asset purchases financed by the issuance of central bank reserves was initiated on 5 March 2009. The previous change in the size of that programme was an increase of ?50 billion to a total of ?325 billion on 9 February 2012.
Historical:
Highest: 1.681 USD on Nov 17, 2009.
Average: 1.5807 USD over this period
Lowest: 1.3506 USD on Jan 23, 2009.
Economic events for the month of June affecting EUR, CHF, GBP and USD
|
Time |
Cur. |
Event |
Forecast |
Previous |
||||
|
Friday, June 01 |
||||||||
|
12:30 |
USD |
8.1% |
8.1% |
|||||
|
12:30 |
USD |
150K |
115K |
|||||
|
14:00 |
USD |
53.9 |
54.8 |
|||||
|
Wednesday, June 06 |
||||||||
|
11:45 |
EUR |
1.00% |
1.00% |
|||||
|
Thursday, June 07 |
||||||||
|
11:00 |
GBP |
0.50% |
||||||
|
Thursday, June 14 |
||||||||
|
07:30 |
CHF |
0.25% |
||||||
|
Wednesday, June 20 |
||||||||
|
08:30 |
GBP |
-13.7K |
||||||
|
Thursday, June 21 |
||||||||
|
08:30 |
GBP |
-1.1% |
||||||
|
08:30 |
GBP |
-2.3% |
||||||
Click here for further GBP/USD Forecast.
Originally posted here
