GBP/USD Monthly Fundamental Forecast February 2013

FXEmpire   |  February 2 2013 6:33 EST

By FXEmpire.com

Outlook and Recommendation

The GBP/USD witnessed a terrible fall in January closing the month at 1.5832. The pair hit a high of 1.6381 early in the month and declined for the balance. January was a challenging month for sterling, which lost over 2.5% against the USD. An important theme was investors desire to redeploy investments into euro, which generated significant selling of GBP. In addition, a still dovish BoE, weak domestic data and a deteriorating in sentiment all weighed on the GBP. We expect that the BoE will ultimately prove less aggressive than the Fed and that investors will continue to seek exposure to the UK, even as its economy struggles to recover.

The outlook for the UK has weakened. Some payback from the Olympics-driven boost in the third quarter was inevitable, however, the fourth-quarter real GDP performance was worse than anticipated. The economy contracted 0.3% q/q, down from +0.9% in the July September period. A 1.8% q/q drop in industrial was accompanied by a subdued 0.3% gain in the construction sector (despite comparatively favorable weather conditions in December), and a flat performance in the services sector. Moreover, on exclusion of temporary factors, it appears that the underlying q/q growth rate was close to zero suggesting that the recovery in 2013 could be weaker than we earlier envisioned, even with the likely rebound in industrial production. We have lowered our growth forecasts to 0.9% and 1.4% in 2013 and 2014, respectively.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name – The Bank of England

Date of next meeting or last meeting: February 7, 2013

Current Rate: 0.50%

Economic events for the month of February affecting EUR, CHF, GBP and USD

Click here a current GBP/USD Chart.

Originally posted here