British pound forecast: Next week data events could weigh heavily on sterling in light of the recent GDP shocker

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Published on Friday, 27 July 2012 09:30

Written by Rob Samson

"PMIs will be closely watched. After the shocking UK Q2 GDP print, any further weakness in manufacturing and services PMIs would weigh heavily on GBP" - BofA Global Research.

The forecast for the pound sterling (Currency:GBP) will be heavily dependent on the actions taken at the US Fed and the ECB next week.

However, data prints in the form of PMIs will also be particularly important to sterling.


"In addition to the central bank decisions, PMIs will be closely watched. After the shocking UK Q2 GDP print, any further weakness in manufacturing and services PMIs would weigh heavily on GBP," says a note from Bank of America Merrill Lynch Global Research.

Recent forex market action has however shown sterling to be resilient. The UK currency has steadied after Wednesday’s GDP disappointment, despite a great deal of euro positivity yesterday.

Yesterday Draghi famously stated that “the ECB is ready to do whatever it takes to preserve the euro, and believe me, it will be enough.”

His comments raised hopes that the ECB will take some emergency measures at next week’s meeting.

The pound euro is now trading at 1.28 and "we maintain a positive outlook for this pair moving forward," says a morning note from Caxton FX.

The pound dollar rate is unchanged at 1.5693.

Sterling followed the euro higher against the US dollar yesterday, as global equities rallied to weaken the greenback.

"At $1.57, this pair is now trading at the very top of its two-month trading range, which we think is a very strong level for this pair. $1.57 brings some stiff resistance and the air looks pretty thin up here," say Caxton.

Meanwhile the sterling to Australian dollar pair is 0.16 pct in the red at 1.5057.

The Australian currency was well-supported in risk-positive trading conditions yesterday.

Easing conditions in the eurozone kept the aussie dollar in demand if the market take a weak US GDP figure this afternoon as a precursor to an imminent QE3 call, then the aussie dollar is likely to remain in good shape.