GBP/USD Daily Forecast - 30 December

There were no data releases from the UK yesterday, however Sterling still remains on the downside as low inflation in the UK has pushed back market expectations of an interest rate rise as far as 2016. Another factor that added to the concerns is that UK unemployment was unchanged at 6.0% in three months to November, while decline to 5.9% was expected. Final GDP reading showed 0.7% growth in third quarter, but BoE is announcing a possible slowdown at the end of the year.

GBP/USD Daily Forecast - 29 December

Sterling fell in the course of the session on Tuesday all the way to below 1.55 handle after UK growth was revised down from 3% to 2.6% cent year-on-year in the third quarter. However it managed to rebound and go above 1.5550 handle around which it was for most of the Friday's session. This also points that we could be seeing slower growth in the fourth quarter, which BoE officials have been announcing for some time now. With falling inflation this is just another reason why despite optimistic predications in the middle of the 2014, it is not likely that we are about to witness BoE's rate hike before the second part of 2015.

Sterling stable around 1.5550 level

Sterling remains within consolidation range that we have been in in the past few weeks. However, general outlook is more on the bearish side at the moment. GDP growth should slow in the fourth quarter, and there are deflation risks since CPI increased only by 1% in November. However, holiday season will spur sales that should contribute to economic growth. It is quite uncertain when BoE will raise its interest rates. At the moment we cannot expect that this will happen before the third quarter of 2015.

Will British pound manage to rebound?