British Pound Forecast – December 7-11

Looking for the latest outlook, for the current week? Check out the section: GBP/USD Forecast

The Pound suffered from week data and the American NFP. The upcoming week is very busy for the Pound, with a rate decision in the limelight. Here’s an outlook for the 10 events that await the Pound, and an updated technical analysis for GBP/USD.

GBP/USD chart with support and resistance lines marked on it. Click to enlarge:

As the US and Europe talk about exit strategies, the Pound is left behind. Apart from the all0important rate decision, the GDP estimate from NIESR is an important event for the Pound, as this institute foresaw the ongoing recession. Let’s review the events. The technical analysis will follow:

1. NIESR GDP Estimate: The National Institute of Economic and Social Research does an independent research on the economy, and releases a monthly GDP estimate, contrary to official quarterly release by the government. Their estimations have proven very accurate. They foresaw the third quarter drop in the GDP while most economists were too optimistic. Even the guys at NIESR were too optimistic, as they usually revise their estimates to the downside. They estimated a drop of 0.4% in both September and October. The estimation for November will be released this week, but the time isn’t known at the moment.
2. BRC Retail Sales Monitor: This indicator is considered the “mini retail sales” as it is similar to the official retail sales release, but doesn’t include all retailers, and is also released before the government’s release. The BRC has shown a rise of 3.8% last month, following a 2.8% in the previous one. Growth is expected to continue in a slower pace. Published on Tuesday at midnight GMT.
3. Manufacturing Production: This important figure isn’t very stable: after a 1.9% drop two months ago, a 1.7% rise was reported last month. Economists expected softer moves, and also now, a 0.5% rise is predicted. Also revisions to previous months can impact the Pound. Note that Industrial Production is published at the same time, but it consists mostly of manufacturing. Industrial production is predicted to rise by 0.6%. Published on Tuesday at 9:30 GMT.
4. CBI Industrial Order Expectations: The Confederation of British Industry shows decreasing order volume expectations since June 2008, although the figure has improved. Last month’s -45 score is expected to improve to -42 this time. Published on Tuesday at 11:00 GMT.
5. Nationwide Consumer Confidence: 1000 consumers are surveyed for this important poll. Consumer confidence has been on the rise in the past 6 months, reaching 72 points last time. This time, it’s expected to tick down to 71 points. This figure influences the MPC members before the rate decision. Published on Wednesday at midnight.
6. Trade Balance: After a few moths of stability, trade balance deficit has grown last month, reaching 7.2 billion. It’s expected to squeeze back to 6.9 billion pounds this time. Published on Wednesday at 9:30 GMT.
7. Annual Pre-Budget Release: The British government releases this annual report, which details the current economic situation, and focuses on the governments numbers. There has been lots of talk about the huge deficit, and how it impacts the economy, including criticism from Mervyn King. Britain is approaching an election next year, and this could be reflected in the report as well. The Pound may suffer from a high deficit. Published on Wednesday at 12:30 GMT.
8. CB Leading Index: Despite being based on several economic indicators that have already been released, this number is still interesting, as it has risen in the past 6 months, contrary to the economy that has shrunk. The rise of 1% that was reported last time isn’t predicted to be followed again – it will probably remain unchanged. Published on Thursday at 10:00 GMT, and might be disregarded due to the rate decision.
9. Rate decision: As in previous months, the focus is on the Quantitative Easing program. The QE program, also known as the Asset Purchase Facility, was expanded to 200 billion last month, in a decision that was a surprise, and was good for the Pound. The MPC Meeting Minutes revealed that the members were split three ways on the decision: some wanted to leave it at 175, other wanted to to expand it to 200 while one member wanted it at 215 billion pounds. Currently, expectations are for an unchanged number of 200 billion. A higher number will hurt the Pound. The Official Bank Rate isn’t expected to move from 0.5%. The wording of the MPC Rate Statement, which was bearish in the past, will also move the Pound in this very important event. Published on Thursday at 12:00 GMT.
10. PPI: Producer prices in Britain have jumped last month by 2.6% and provided a good surprise for cable traders. This time, PPI Input, the more important figure, is predicted to rise by .6%. PPI Output is predicted to rise by 0.4%. Published on Friday at 9:30 GMT.

GBP/USD Technical Analysis

The Pound had a bad start to the week, falling to 1.6380. It then made a neat steady rise all the way to 1.6710, but then began going down, especially on Friday. It closed under 1.65, at 1.6468.

The initial minor resistance line is at 1.65, a line that was mentioned also in last week’s outlook. Above that, 1.6876 was the peak in recent weeks, and continues to serve as a resistance line. The year-to-date peak at 1.7040 is the next resistance line.

Looking down, 1.6260 that was reached recently, serves as significant support. Below, 1.6110 is the next support line, as it served as a resistance line before the Pound went up.

The ultimate support line appears at 1.5720, where GBP/USD bounced off when it began the comeback.

My sentiment is bearish on GBP/USD.

In addition to the ongoing recession, the heavy deficit, that will be seen this week, and a possible expansion of the QE program, may hurt the Pound some more. The stronger dollar that was seen on Friday doesn’t help the Pound either.

Further reading:

• For a broad view of all the week’s major event in all currencies, read the  forex weekly outlook.
• For the Euro, read the  EUR USD Forecast.
• For GBP/USD, look into the  British Pound forecast.
• For the Australian dollar, read the  AUD/USD forecast.
• For USD/CAD, check out the  Canadian dollar forecast.

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