The GBP/USD fell in the week ended Nov. 4 after showing a rise over the past few weeks as the tensions in markets and weak fundamentals triggered safety demand on the U.S. dollar as a safe haven.
Fears reignited once again after Greek Prime Minister George Papandreou had surprised markets and European leaders with his call for a referendum on the euro area’s latest bailout package granted to Greece.
In fact, rejecting the bailout would deprive Greece from receiving the next 8 billion euro aid tranche needed to avert default which will in turn push Greece into a disorderly bankruptcy that might end its membership in the euro.
In addition, lackluster manufacturing and services reports from China, Switzerland, euro area, U.K., and U.S. worsened outlook for global major economies as it suggested that the sluggish growth pace would continue in the fourth quarter or even beyond that, thereby enhancing demand on refuges led by the greenback.
The drop in U.K. manufacturing and services gauges offset the data showing that Britain expanded 0.5% in the three months ended September, according to the GDP advanced reading, beating estimates of 0.3% and exceeding the 0.1% expansion recorded in the second quarter.
Last week, the Fed lowered growth forecasts and raised estimates for unemployment, whilst revealing that purchasing mortgage-backed securities is a valid option for the Fed to boost the slackening recovery.
This week, the main focus will be the BoE rate decision along with other important data from the U.K. while the U.S. does not have highly relevant release.
For this week, the release of the data will be as follows:
Monday Nov. 7:
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 Nov. 8:
At 09:30 GMT, the British economy will release industrial and manufacturing production for the month of Sep., where the U.S. has no releases.
Wednesday Nov. 9:
U.K. visible trade balance report for the month of Sep. will be due at 09:30 GMT. The U.S., on the other hand, will release MBA mortgage applications for Nov. 4 at 12:00 GMT followed by whole sale inventories at 15:00 GMT.
Thursday Nov. 10:
The main focus will be in the main highlight of highlight of the week which the BoE rate decision for Nov. 10. At 12:00 GMT, the BoE will hold both borrowing cost and APF quantity on hold at 0.50% and 275 billion pounds.
As of 13:30 GMT, the U.S economy will release trade balance which is expected to show a widened deficit of $46.0 billion in Sep. from $45.6 billion deficit a month earlier. At the same time, initial jobless claims for the week ended Nov. 4 and continuing claims for the week ended Oct. 28 will be available. At 19:00 GMT, the monthly budget statement for Oct. is predicted to show a deficit of $110.5 billions.
Friday Nov. 11:
The week ends with the release of U.K. PPI for Oct. will be released at 09:30 GMT. While the U.S. will release University of Michigan confidence, at 14:55 GMT, which is estimated to slide to 60.0 in Nov. compared with the prior reading of 60.9.
