GBP/USD Weekly Fundamental Analysis June 4 – 8, 2012, Forecast

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 fell the entire week, closing at 1.5363. The week was in risk aversion mode as Spain, Italy and Greece were like the acts in a 3 ring circus, moving back and forth to center stage but always performing. Between the bickering amongst politicians and bankers, Spain and the election polls in Greece and the Italian bond yields, the markets were not sure what to look at next.

The USD continued to soar, climbing to record highs with the DI trading well above 0.83.

This was a week of news flows, which the IMF, the ECB, the EU and the OECD making headlines daily. The lasting headline was a warning to the Bank of England and its inaction. The UK economy has been suspect for a while now with no strongly negative eco data, expect GDP and then the revision of the GDP reinforcing the technical recession, which markets had shrugged off weeks ago, but was not keeping investors away from the sterling. It was originally thought that the pound would benefit by the risk aversion and negative sentiment towards the euro, but investors shied away allowing the sterling to weaken.

Date	Last	Open	High	Low	Change %
Jun 01, 2012	1.5363	1.5396	1.5436	1.5268	-0.22%
May 31, 2012	1.5397	1.5482	1.5526	1.5362	-0.54%
May 30, 2012	1.5481	1.5632	1.5638	1.5472	-0.97%
May 29, 2012	1.5632	1.5666	1.5716	1.5609	-0.22%
May 28, 2012	1.5667	1.5679	1.5717	1.5664	-0.08%

June 7^th is the day to watch, with the BoE rate decision and statement. Last month, the BoE left everything on hold, allowing them to avoid making a public statement.

US markets should face relatively few domestic market influences next week and will instead spend much of the week focused upon global factors. Data flow will be fairly light. Total factory orders are expected to come in roughly flat and in line with previously released durable goods orders, and the only new information here will be nondurable goods orders. ISM services should continue to demonstrate signs of a modest service sector expansion, but the pace has significantly diminished since February. The Fed’s Beige Book should point to mixed regional economic conditions, with regional anecdotes of soft job markets combined with mildly more encouraging manufacturing and housing markets. Friday’s April trade report will be used partly for revisions and how they may impact the third swing at US Q1 GDP, but should also start off Q2 on mildly firmer footings in nominal terms as lower oil prices begin to benefit the trade balance. Offsetting much of this via exports is likely to be softening growth in China and no growth in Europe on balance.

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.

Major Economic Events for the week of May 28- June 1 actual v. forecast for Euro, GPB, and the Franc

Time	Cur.	Event	Actual	Forecast	Previous
Tuesday, May 29
06:00	GBP	CBI Distributive Trades Survey	21	-7	-6
Wednesday, May 30
03:00	CHF	KOF Leading Indicators	0.81	0.48	0.43
Thursday, May 31
01:45	CHF	GDP (QoQ)	0.7%	0.1%	0.5%
02:00	GBP	Nationwide HPI (MoM)	0.3%	0.2%	-0.3%
05:00	EUR	CPI (YoY)	2.4%	2.5%	2.6%
Friday, June 01
03:15	CHF	Retail Sales (YoY)	0.1%	2.0%	4.7%
03:30	CHF	SVME PMI	45.4	46.4	46.9
04:00	EUR	Manufacturing PMI	45.1	45.0	45.0
04:30	GBP	Manufacturing PMI	45.9	49.7	50.2
05:00	EUR	Unemployment Rate	11.0%	11.0%	11.0%

Major Economic Events for the week of May 28- June 1 actual v. forecast for the US Dollar

Time

Cur.

Event

Actual

Forecast

Previous

Tuesday, May 29

10:00

USD

CB Consumer Confidence

64.9

70.0

68.7

Wednesday, May 30

10:00

USD

Pending Home Sales (MoM)

-5.5%

0.1%

3.8%

Thursday, May 31