GBP/USD Weekly Forecast – 14 March

Friday, Mar 11 2016

Events that marked the week:

There were no data releases from the UK on Tuesday, but the focus was on boE Governor Carney testimony at the UK Treasury Committee. Bank of England (BoE) governor Mark Carney reiterated that the British central bank would not make a recommendation on the referendum scheduled for June 23 that would decide if the U.K. remains in the European Union (EU) or decides to leave the group, commonly referred to as “Brexit”, but that he would ensure actions to mitigate any short-term effects to financial stability.

Testifying in front of the U.K. Treasury Committee on the topic of economic and financial costs and benefits of membership in the EU, Carney insisted on Tuesday that his institution would not take a position on the Brexit issue or make any type of recommendation for the vote. The BoE governor did note however that at EU deal could improve stability of the banking union which he insisted would definitely help financial stability in the U.K. On a similar note, BoE deputy governor Jon Cunliffe said that the EU renegotiation deal was significant and that parties recognized the need to separate non-euro zone countries from those belonging to the monetary union.

Wednesday brought Industrial Production data. Total production is estimated to have increased by 0.3% between December 2015 and January 2016. Analysts were expecting 0.6% increase. There were increases in 3 of the 4 main sectors, with manufacturing (the largest component of production), having the largest positive contribution, increasing by 0.7%.The largest contribution to the increase in manufacturing, between December 2015 and January 2016, came from other manufacturing & repair, which increased by 4.8%. This industry includes the manufacture of furniture, other manufacturing & repair and installation of machinery & equipment.

From the UK on Friday, Trade Balance data was published. The UK’s deficit on trade in goods and services was estimated to have been £3.5 billion in January 2016, a narrowing of £0.2 billion from December 2015. The narrowing is attributed to trade in goods where the deficit has narrowed from £10.5 billion in December 2015, to £10.3 billion in January 2016. This was in line with market forecasts. The narrowing of the trade in goods deficit between December 2015 and January 2016 reflected a decrease in imports of £0.2 billion to £33.2 billion attributed to falls in unspecified goods and fuels.

This week markets will be looking at:

Claimant Count Change/Average Earnings Index/Unemployment Rate (Wednesday 10:30)

BoE Meeting Minutes (Thursday 13:00)

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