Rule: 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

Analysis and Recommendation:

The GBP/USD is down at 1.5834 on strength in the USD. Earlier last week it looked like the sterling might break the 1.60 mark but was stopped at 1.5974. The UK which has already adopted a strong fiscal goal and has continued to reduce debt and deficit spending is starting to see results. On Wednesday sterling was hit by a new selling wave after the publication of the Minutes of the previous BoE meeting. The voting pattern at the February meeting was 7-2 to raise the amount of asset purchases by £50 billion. Two members voted in favor of an increase by £75 billion. Markets apparently saw the combination of 2 voters in favor of more QE while no one voted to leave the amount of asset purchases unchanged as keeping the door open for an additional move of the BoE in the future. BoE's Miles, one of the dissenters, defended its approach in detail in the press.

Both the USD and the pound are showing strength and it will be a battle this week to see who is strongest.

Only Good News from the US:

Existing home sales US existing home sales picked up unexpectedly in January, but the previous figures were downwardly revised. 

Initial jobless claims US initial jobless claims stayed unchanged in the week ending February the 18th, while the consensus was looking for an increase.

University of Michigan consumer confidence The final figure of Michigan consumer confidence for February showed a strong upward, revision from 72.5 to 75.3, while only a minor one was expected.

New home sales After increasing for four consecutive months, US new home sales dropped at the start of 2012. 

Federal Reserve Chairman Bernanke testified before the Senate, this week, the markets found his comments a bit dovish and drew conclusions that any additional QA was off the table for the time being. Although the Chairman warned that the economy was recovering, he stated it was fragile and he was still worried about jobs. Gold soared on his comments.

News from the Eurozone

This week starts off with an agreement on the Greek bailout and approval from the EU, ECB and IMF. Greece passes a major hurdle and now needs to complete their agreement with the IIF.

There are worries about the CDS swaps triggering a credit event, at first, the initial ruling ruled that there would be no credit event, but it turns out that ruling was on a very small question concerning the ECB, it seems now that now that Greece has passed the new laws so they can force bondholders to accept the agreement, it will now trigger a credit event and CDS insurance will have to payout.

The ECB, liquidity operation, although successful, loans funds to over 800 banks, in excess of 500 billion euros. Markets are now worried about the consequences.

Spain reported that they will miss their budget deficit target this year, but still remain on track for 2013.

The EU approved the next tranche for Portugal.

The G20 meeting in Mexico ended without any results with non euro nations saying that the eurozone needs to pick up their game and show their money before any others would consider participating.

The EU Summit this past week went off quietly without much in the way of announcements.

Consumer confidence European Commission's consumer confidence improved for a second straight month in February. Consumer confidence rose from -20.7 to -20.2, marginally  weaker than expected (-20.1).

Industrial new orders  Euro zone industrial new orders rebounded by 1.9%  M/M in December, while only a moderate pick up was expected.

IFO business climate indicator The German IFO index rose for a fourth consecutive month in February. The indicator jumped from 108.3 to 109.6, while a more moderate increase was expected.

Manufacturing PMI Euro zone manufacturing PMI extended its rebound in  February, rising for a third consecutive month, but at a  slower pace.  Services PMI After three consecutive increases, euro zone services PMI fell back in February, from 50.4 to 49.4, while a  slight increase was expected.

In January, the euro zone unemployment rate rose unexpectedly. The unemployment rate jumped from an upwardly revised 10.6% (earlier reported as 10.4%) to 10.7%, while the consensus was looking for stabilization at 10.4%. Eurostat estimates that the number of people unemployed rose by 185 000 in the euro area in January, to a total level of 16.925 million. The highest unemployment rates were observed in the Spain (23.3%), Greece (19.9% in November), Ireland and Portugal (both 14.8%). The youth unemployment rate (under 25) was 21.6% in the euro zone. The euro zone unemployment rate is now at the highest level since October 1997 and is just 0.2% below its all time high, suggesting that a jump above the all-time highs is not excluded in the coming months.

 width=645

Historical:

Highest: 1.681 USD on 17 Nov 2009.

Average: 1.5807 USD over this period

Economic Events

Only Major Events:

Please refer to the daily forecasts for all economic data releases for each day, with details and forecast.

Mar. 07

13:15

 

USD

 
 
 

ADP Nonfarm Employment Change 

 

 
 
 
 
 
 

Mar. 08

12:00

 

GBP

 
 
 

Interest Rate Decision 

 

 
 
 
 
 
 

 

12:45

 

EUR

 
 
 

Interest Rate Decision 

 

 
 
 
 
 
 

 

13:30

 

USD

 
 
 

Initial Jobless Claims 

 

 
 
 
 
 
 

 

13:30

 

EUR

 
 
 

ECB President Draghi Speaks 

 

 
 
 
 
 
 

Mar. 09

02:00

 

CNY

 
 
 

Chinese CPI (YoY) 

 

 
 
 
 
 
 

 

13:30

 

USD

 
 
 

Nonfarm Payrolls 

 

 
 
 
 
 
 

 

13:30

 

USD

 
 
 

Trade Balance 

 

 
 
 
 
 
 

 

13:30

 

USD

 
 
 

Unemployment Rate 

 

 
 
 
 
 
 

1st of the month global economic data releases actual v. forecast

 

AUD

 
 
 

Building Approvals (MoM) 

0.9%

 

2.1% 

 

-1.0% 

 
 

 

AUD

 
 
 

Private New Capital Expenditure (QoQ) 

-0.3%

 

3.9% 

 

14.6% 

 
 

 

INR

 
 
 

Indian Trade Balance 

-14.8B

 

-11.0B 

 

-12.7B 

 
 

 

CHF

 
 
 

GDP (QoQ) 

0.1%

 

-0.1% 

 

0.3% 

 
 

 

GBP

 
 
 

Nationwide HPI (MoM) 

0.6%

 

0.3% 

 

-0.3% 

 
 

 

CHF

 
 
 

SVME PMI 

49.0

 

48.5 

 

47.3 

 
 

 

EUR

 
 
 

French Manufacturing PMI 

50.0

 

50.2 

 

50.2 

 
 

 

EUR

 
 
 

German Manufacturing PMI 

50.2

 

50.1 

 

50.1 

 
 

 

EUR

 
 
 

Manufacturing PMI 

49.0

 

49.0 

 

49.0 

 
 

 

PLN

 
 
 

Polish GDP (YoY) 

4.3%

 

4.2% 

 

4.2% 

 
 

 

GBP

 
 
 

Manufacturing PMI 

51.2

 

52.0 

 

52.0 

 
 

 

EUR

 
 
 

CPI (YoY) 

2.7%

 

2.6% 

 

2.6% 

 
 

 

EUR

 
 
 

Unemployment Rate 

10.7%

 

10.4% 

 

10.6% 

 
 

 

USD

 
 
 

Core PCE Price Index (MoM) 

0.2%

 

0.2% 

 

0.1% 

 
 

 

CAD

 
 
 

Current Account 

-10.3B

 

-9.6B 

 

-12.3B 

 
 

 

USD

 
 
 

Personal Spending (MoM) 

0.2%

 

0.4% 

 

0.0% 

 
 

 

USD

 
 
 

Initial Jobless Claims 

351K

 

353K 

 

353K 

 
 

 

USD

 
 
 

Continuing Jobless Claims 

3402K

 

3400K 

 

3404K 

 
 

 

USD

 
 
 

ISM Manufacturing Index 

52.4

 

54.6 

 

54.1 

 
 

 

USD

 
 
 

Fed Chairman Bernanke Testifies 

 

 
 
 
 
 
 

 

KRW

 
 
 

South Korean CPI (YoY) 

3.1%

 

3.5% 

 

3.4% 

 
 

 

JPY

 
 
 

Unemployment Rate 

4.6%

 

4.5% 

 

4.6% 

 
 

 

JPY

 
 
 

Tokyo Core CPI (YoY) 

-0.3%

 

-0.4% 

 

-0.4% 

 
 

Government Bond Auction Schedule

Mar 05  10:10  Norway  Bond auction

Mar 06  10:10  Greece  Auctions 6M T-bills

Mar 06  10:15  Austria  Bond auction

Mar 06  10.30  UK  Auctions 0.75% 2034 I/L Gilt

Mar 06  15:30  UK  Details gilt auction on Mar 15

Mar 07  10:10  Sweden  Nominal bond auction

Mar 07  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Mar 07  10.30  UK  Auctions new Sep 2017 conventional Gilt

Mar 08  16:00  US

Announces auctions of 3Y Notes on Mar 12, 10Y Notes on Mar

13 & 30Y Bonds on Mar 14

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

 

Name S3 S2 S1 Pivot R1 R2 R3

Classic
1.5661
1.5742
1.5788
1.5869
1.5915
1.5996
1.6042

Fibonacci
1.5742
1.5791
1.5820
1.5869
1.5918
1.5947
1.5996

Camarilla
1.5799
1.5811
1.5822
1.5869
1.5846
1.5857
1.5869

Woodie's
-
1.5733
1.5771
1.5860
1.5898
1.5987
-

DeMark's
-
-
1.5892
1.5858
1.5765
-
-