By FXEmpire.com
Introduction: While the ranges are wider (and so should stops be), the lines are rather distinctive, especially towards the borders of the long term wide range. This pair makes for good trades, with the new austerity program implemented in the UK, the GBP is moving more on Fundamentals now.
- The interest rate differential between the Bank of England(BoE) and the Federal Reserve
- High yield and attractive growth in the UK drives GBP/USD higher
Weekly Analysis and Recommendation:
The GBP/USD continued to decline against the strong USD, ending the week at 1.5585.
The problems in the UK seem to stem from the BoE, even though they recently announced new measures with the Finance Minister, it is the overall attitude of the BoE which is holding back the UK economy. Recently the IMF director took on the BoE directly saying they need to do more to help stimulate the economy.
This week saw the release of the MPC minutes, unsurprisingly, the minutes evolved in the dovish direction. Given the incremental news on domestic and international activity, inflation and financial market developments, the thrust was always going to turn more dovish.
Nonetheless, the vote was more dovish than expected, with 4 members now dissenting in favor of more QE (compared with one the previous month). Even more striking was that the Governor, Mervyn King was on the losing side. King, Posen and Miles wanted GBP50bn of QE. Meanwhile Fisher dissented for the first time in his MPC career, but only cautiously — opting for GBP25bn of additional asset purchases.
Most MPC members agreed that more economic stimulus was required either immediately, or it would probably become warranted.
So the key questions to come out of these minutes are:
What kind of further policy loosening? Are the additional liquidity measures announced in last week’s Mansion House speech enough?
Furthermore, with even more economic stimulus likely to come from the Bank’s Financial Policy Committee (announcement expected Friday 29th) does the MPC really need to conduct more QE as well?
Have developments since the June MPC meeting made the case for more policy ease stronger or weaker?
Since the June meeting the Governor announced a substantial package of measures in his Mansion House speech. There has been some dovish news on inflation, but there has also been some relief from the Greek election result. The minutes told us that the 5 members who didn’t vote for more QE were awaiting the outcomes of these and to see whether the FPC meeting delivered even further economic stimulus. Last but not least, these members were awaiting the European Council meeting at the end of the month. It isn’t over until it’s over.
In the US this week data risk will be mostly focused upon three reports. We think consumer confidence will take a step back as lower gasoline prices are offset by deteriorating jobs data and by weak equities up to the survey period. Durable goods are also likely to come in soft with few aircraft orders and a likely softer vehicle orders component. Personal spending isn’t shaping up well either given that we already know that retail sales slipped lower during May, although services spending may be more resilient. In all, the main releases may extend the tone of disappointing higher frequency reports on the health of the US economy in the lead-up to the following week when the big releases like ISM and nonfarm hit. Other releases next week include new home sales following a weak resale report, and pending home sales that may get a lift after the prior month’s sharp drop. There are no expected revisions to the final Q1 GDP figures
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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.
Major Economic Events for the week of June 19-22, 2012 actual v. forecast
|
Date |
Time |
Currency |
Importance |
Event |
Actual |
Forecast |
Previous |
|
Jun. 19 |
02:30 |
AUD |
Monetary Policy Meeting Minutes |
||||
|
10:00 |
EUR |
German ZEW Economic Sentiment |
-16.9 |
4.0 |
10.8 |
||
|
Jun. 20 |
09:30 |
GBP |
Claimant Count Change |
8.1K |
-3.0K |
-12.8K |
|
|
17:30 |
USD |
Interest Rate Decision |
0.25% |
0.25% |
0.25% |
||
|
19:15 |
USD |
Fed Chairman Bernanke Speaks |
|||||
|
23:45 |
NZD |
GDP (QoQ) |
1.1% |
0.5% |
0.4% |
||
|
Jun. 21 |
09:30 |
GBP |
Retail Sales (MoM) |
1.4% |
1.2% |
-2.4% |
|
|
13:30 |
Core Retail Sales (MoM) |
-0.3% |
0.2% |
0.3% |
|||
|
13:30 |
USD |
Initial Jobless Claims |
387K |
380K |
389K |
||
|
15:00 |
USD |
Existing Home Sales |
4.55M |
4.57M |
4.62M |
||
|
Jun. 22 |
09:00 |
EUR |
German Ifo Business Climate Index |
105.3 |
105.9 |
106.9 |
|
|
13:30 |
CAD |
Core CPI (MoM) |
0.2% |
0.3% |
0.4% |
Historical:
Highest: 1.681 USD on Nov17, 2009.
Average: 1.5807 USD over this period
Lowest: 1.3506 USD on Jan 23, 2009.
Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD
|
Date |
Time |
Currency |
Event |
Previous |
|
Jun 25 |
6:00 |
EUR |
GfK German Consumer Climate |
5.7 |
|
25th-30th |
GBP |
Nationwide HPI m/m |
0.3% |
|
|
14:00 |
USD |
New Home Sales |
343K |
|
|
Jun 26 |
8:30 |
GBP |
Public Sector Net Borrowing |
-18.8B |
|
13:00 |
USD |
S&P/CS Composite-20 HPI y/y |
-2.6% |
|
|
14:00 |
USD |
CB Consumer Confidence |
64.9 |
|
|
Jun 27 |
All Day |
EUR |
German Prelim CPI m/m |
-0.2% |
|
8:30 |
GBP |
BBA Mortgage Approvals |
32.4K |
|
|
10:00 |
GBP |
CBI Realized Sales |
21 |
|
|
12:30 |
USD |
Durable Goods Orders m/m |
0.2% |
|
|
14:00 |
USD |
Pending Home Sales m/m |
-5.5% |
|
|
14:30 |
USD |
Crude Oil Inventories |
||
|
Jun 28 |
7:55 |
EUR |
German Unemployment Change |
0K |
|
8:30 |
GBP |
Current Account |
-8.5B |
|
|
8:30 |
GBP |
BOE Credit Conditions Survey |
||
|
8:30 |
GBP |
Final GDP q/q |
-0.3% |
|
|
12:30 |
USD |
Unemployment Claims |
||
|
12:30 |
USD |
Final GDP q/q |
1.9% |
|
|
23:01 |
GBP |
GfK Consumer Confidence |
-29 |
|
|
Jun 29 |
29th-4th |
EUR |
German Retail Sales m/m |
0.6% |
|
6:45 |
EUR |
French Consumer Spending m/m |
0.6% |
|
|
7:00 |
CHF |
KOF Economic Barometer |
0.81 |
|
|
8:00 |
EUR |
M3 Money Supply y/y |
2.5% |
|
|
9:00 |
EUR |
CPI Flash Estimate y/y |
2.4% |
|
|
12:30 |
USD |
Core PCE Price Index m/m |
0.1% |
|
|
12:30 |
USD |
Personal Spending m/m |
0.3% |
|
|
13:45 |
USD |
Chicago PMI |
52.7 |
|
|
13:55 |
USD |
Revised UoM Consumer Sentiment |
74.1 |
Upcoming Government Bond Auctions
Date Time Country
Jun 25 09:10 Norway
Jun 25 09:30 Germany
Jun 25 10:00 Belgium
Jun 25 15:30 Italy
Jun 26 00:30 Japan
Jun 26 08:30 Holland
Jun 26 08:30 Spain
Jun 26 09:10 Italy
Jun 26 09:30 UK
Jun 26 14:30 UK
Jun 26 17:00 US
Jun 27 09:10 Italy
Jun 27 09:10 Sweden
Jun 27 17:00 US
Jun 28 09:10 Italy
Jun28 17:00 US
Click here a current GBP/USD Chart.
Originally posted here
