gbp fundamentals

British Pound Recovers Following Early Morning Test of 1.8520

Friday, 15 August 2008 22:49:36 GMT  |  Terri Belkas, Currency Strategist

Following an early morning test of 1.8520, the British pound finally managed to gain on Friday as the currency remains extremely oversold. In fact, as Quantitative Analyst David Rodriguez noted in his British pound forecast, the currency may be due for a bounce after 11 consecutive down days – the worst losing streak in the past twenty years of forex trading.

Heavy event risk looms for the GBP/USD pair next week though, including the release of the minutes from the BOE’s August policy meeting, UK retail sales, and the second reading of Q2 GDP. In the BOE meeting minutes, traders should watch the vote count, as more than one vote for a rate cut or hike could trigger sharp directional moves in the pair. Meanwhile, UK retail sales are anticipated to slow for the second consecutive month during July at a rate of -0.2 percent, helping to drag the annual rate of growth down to a more than 2-year low of 1.8 percent. The data would be in line with the British Retail Consortium’s (BRC) July survey, which indicated that consumers tightened their purse strings and led same-store sales to tumble 0.9 percent from last year. Finally, Q2 GDP is expected to be revised down to an annual rate of 1.5 percent from 1.6 percent, matching the Q1 1993 low. With recent PMI reports reflecting contraction in the services, construction, and manufacturing sectors, there may be additional downside risk for this particular reading. My fundamental bias for the British pound early next week: bullish. Thereafter, though, GBP/USD could fall lower.

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