GBP/USD Daily Forecast

Monday, Dec 21 2015

There were no data releases from the UK yesterday, but traders are still being focused on speculation when will BoE rise its interest rates, following Fed's rate hike. One of the Bank of England's most hawkish policymakers has signalled that he is unlikely to vote for higher interest rates in the near future. Martin Weale said a surprise "pause in wage growth" and further falls in commodity prices made the need for tighter policy "slightly less immediate".

"The factors pushing down on inflation have become a bit more prolonged," he said in an interview with the Telegraph. Mr Weale said the Monetary Policy Committee (MPC) that sets interest rates had more "breathing space" to assess how these factors would affect inflation, as he noted that there had been "very little wage growth" over the past six months.

"I initially thought that the weak wage growth was a wobble that represented stray numbers that you get once or twice from time to time. There has plainly been something more to it than that," he said. Mr Weale said there was evidence to suggest that the full impact of interest rate rises could feed through to the economy "a little bit earlier" than the 18-24 month horizon suggested by economists, which also supported the case for keeping rates on hold a bit longer. "It's just another of the things that makes the need [to raise interest rates] slightly less immediate," he said.

Tomorrow's session will bring Public Sector Net Borrowing data. Incline in budget deficit to 11.9 billion is expected. In the US session Final GDP and Existing Home Sales figures are scheduled for a release. Analysts are forecasting 1.9% increase in GDP, while Existing Home Sales should show annual level of 5.32 million.

Figures to watch:

Public Sector Net Borrowing (Tuesday 10:30)

Final GDP (Tuesday 14:30)

Existing Home Sales (Tuesday 16:00)

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