GBP/USD Weekly Fundamental Analysis March 16-24, 2012, Forecast

• 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

Analysis and Recommendation:

The GBP/USD had a pretty large trading range this week, from a low of 1.5663 to a high of 1.5861, the pair are trading currently at 1.5844

This week the Sterling was hit by two major blows.

The number of British workers seeking jobless benefits rose by 7,200 in February to 1.61 million, the Office for National Statistics reported Wednesday. Economists had forecast a rise of 5,000. The number of unemployed persons rose by 28,000, rising well above forecasts, surprising lawmakers and economist.

Fitch Ratings is lowering its outlook for the United Kingdom, indicating a ratings downgrade may be coming.

The rating agency said that while the UK was well-positioned now, it had limited ability to absorb any further economic shocks from the European economic crisis.

While data from the US continued to show positive results supported by addresses by the FOMC and Fed Chairman Bernanke, continued to push the dollar to higher numbers. Towards the end of the week, some inflationary data, make investors worry that this would be the end of any monetary easing by the Feds, also the confidence gave investors the taste for riskier assets. In the very last few hours of the week, the USD fell against most of its trading partners.

The pair should fall in early week trading back to the 1.5663 low of last week, with little data or information to support a move elsewhere. Retail sales numbers are due in the UK and are expected to be down.

 

Historical:

Highest: 1.681 USD on 17 Nov 2009.

Average: 1.5807 USD over this period

Major Economic Events for the week of March 19-24

Mar. 20

01:30

 

AUD

 
 
 

Monetary Policy Meeting Minutes 

 

 
 
 
 
 
 

Mar. 21

10:30

 

GBP

 
 
 

MPC Meeting Minutes 

 

 
 
 
 
 
 

 

15:00

 

USD

 
 
 

Existing Home Sales 

 

 
 
 
 
 
 

 

22:45

 

NZD

 
 
 

GDP (QoQ) 

 

 
 
 
 
 
 

Mar. 22

10:30

 

GBP

 
 
 

Retail Sales (MoM) 

 

 
 
 
 
 
 

 

13:30

 

CAD

 
 
 

Core Retail Sales (MoM) 

 

 
 
 
 
 
 

 

13:30

 

USD

 
 
 

Initial Jobless Claims 

 

 
 
 
 
 
 

 

17:00

 

EUR

 
 
 

ECB President Draghi Speaks 

 

 
 
 
 
 
 

Mar. 23

12:00

 

CAD

 
 
 

Core CPI (MoM) 

 

 
 
 
 
 
 

 

15:00

 

USD

 
 
 

New Home Sales 

 

 
 
 
 
 
 

The week's highlights

In Australia, data on skilled vacancies and merchandise imports is set for release.

The Bank of England will also release the minutes of its last meeting, while data on housing starts and building approvals is due in the United States.

The European Union will release draft proposals regarding the regulation of shadow banks.

The International Monetary Fund will host high level talks at the two day China-India conference in New Delhi.

RBA Governor Glenn Stevens will speak at an investment conference in the week ahead.

Monday

The National Association of Home Builders housing market index for March will be released in the United States on Monday.

Tuesday

The RBA will release the minutes of its March policy meeting, where it kept the official cash rate on hold for the second consecutive time. Investors will watch carefully for any reflection on the expected direction that rates will take over the rest of the year. Most economists are still expecting at least one more rate cut in 2012.

US February housing starts figures and building approval data released. Economists are forecasting housing starts to be flat for the month, at around 700,000.

In the United Kingdom, February consumer price index data is awaited, alongside retail price index figures for the month.

Wednesday

The international merchandise figures for February reported by the Australian Bureau of Statistics. Also the Department of Education and Workplace Relations will release its skilled vacancies index for February.

February existing home sales figures in the US, along with the weekly Energy Information Administration petroleum status report. Analysts expect the data to show a rise in home sales of about two per cent.

Thursday

Mortgage Bankers Association mortgage applications figures are also due.

Elsewhere, the Bank of England will release the minutes of its last policy meeting.

UK public sector net borrowing for February is also due. 

Also due is the highly anticipated jobless claims data is out in the US. February retail sales data is expected in the UK.

Friday

US new home sales figures for February and experts expect sales to have risen by 6,000 to 327,000.

Economic Releases for the week of March 12-16

Mar. 13

 

JPY

 
 
 

Interest Rate Decision 

0.10%

 

0.10% 

 

0.10% 

 
 

 

 

EUR

 
 
 

German ZEW Economic Sentiment 

22.3

 

10.5 

 

5.4 

 
 

 

 

USD

 
 
 

Core Retail Sales (MoM) 

0.9%

 

0.8% 

 

1.1% 

 
 

 

 

USD

 
 
 

Retail Sales (MoM) 

1.1%

 

1.1% 

 

0.6% 

 
 

 

 

USD

 
 
 

Interest Rate Decision 

0.25%

 

0.25% 

 

0.25% 

 
 

Mar. 14

 

GBP

 
 
 

Claimant Count Change 

7.2K

 

6.0K 

 

7.0K 

 
 

Mar. 15

 

CHF

 
 
 

Interest Rate Decision 

0.00%

 

0.00% 

 

0.00% 

 
 

 

 

USD

 
 
 

Initial Jobless Claims 

351K

 

356K 

 

365K 

 
 

Mar. 16

 

USD

 
 
 

Core CPI (MoM) 

0.1%

 

0.2% 

 

0.2% 

 
 

 

 

USD

 
 
 

CPI (MoM) 

0.4%

 

0.4% 

 

0.2% 

 
 

 

Government Bond Auctions (this week)

 Mar 19  n/a   Greece  CDS Auction

Mar 19  10:10  Slovakia  Bond auction

Mar 19  10:10  Norway  T-bill auction

Mar 20  09:30  Spain  12 & 18M T-bill auction

Mar 21  10:10  Sweden  Nominal bond auction

Mar 21  10:30  Germany  Eur 5.0bn Mar 2014 Schatz

Mar 21  10:30  Portugal  Eur 0.75-1.0bn 4 & 6M T-bills

Mar 22  10:10  Sweden  I/L bond auction

Mar 22  10.30  UK  Auctions 0.625% 2042 I/L Gilt

Mar 22  15:00  US

Announces auctions of 2Y Notes on Mar 27, 5Y Notes on Mar

28 & 7Y Notes on Mar 29

GBP/USD Pivot Points (Time Frame: 1 Day)
 

Name S3 S2 S1 Pivot R1 R2 R3

Classic
1.5797
1.5813
1.5823
1.5839
1.5849
1.5865
1.5875

Fibonacci
1.5813
1.5823
1.5829
1.5839
1.5849
1.5855
1.5865

Camarilla
1.5826
1.5828
1.5831
1.5839
1.5835
1.5838
1.5840

Woodie's
-
1.5812
1.5820
1.5838
1.5846
1.5863
-

DeMark's
-
-
1.5844
1.5836
1.5818
-
-