GBP/USD Forecast Dec. 19-23, 2011, Fundamental Analysis

In the week ended Dec. 16, the GBP/USD showed decline as the tensions stemming from the euro area enhanced demand on the dollar as a refuge.

The rise in Italian bond yields, downgrade by Fitch to large European lenders and weak growth outlook for the euro area in addition to the uncertain outlook for the global economy gave strong support for the greenback.

On the other hand, downbeat data from the U.K. increased speculations the BoE may add to the stimulus at the beginning of the year, especially after the slowdown in inflation to 4.8% in the year ended November, according to the consumer price index annual gauge, from 5.0% in October.

The releases showed that U.K. unemployment hovered around the highest level in 17 years in the three months to Oct. while retail sales with auto fuel dropped 0.4% in Nov.

However, the improvement in the U.S. data managed to ease some of the tensions in the market, yet it did not shift the sentiment as the main concern meanwhile is still on the euro zone as investors believe the debt crisis may drag global economies into another recession as well as financial turbulences with the beginning of 2012.

This week, the main focus will be on GDP final reading from both economies, BoE minutes from the U.K. and housing data from theU.S.in addition to other important news.

The release of the data this week will be as follows:

Monday Dec. 19:

Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.

Tuesday Dec. 20:

The U.K. will release Gfk consumer confidence survey for Dec. and nationwide consumer confidence for Nov. will be available at 00:01 where the former is predicted to linger at -31 while the later will steady at 36. At 11:00 GMT, U.K. CBI trends total orders for Dec. will be out, yet the news is not expected to have a significant impact on the pair’s movements.

The main focus in the U.S. will be housing starts and building permits for Nov. due at 13:30 GMT which will provide evidence about the status of the housing market that triggered the 2008 crisis. Housing starts are expected to decrease to 630,000 from 628,000 in Oct., while building permits will probably show a fall to 633,000 from the prior 653,000.

Wednesday Dec. 21:

Attention will be toward BoE minutes, due at 09:30 GMT; at the same time, public finance excluding interventions will be due with expectations referring to a deepening deficit to 19.0 billion pounds in Nov. from the prior 6.5 billion pounds.

Eyes will be on MBA mortgage applications for Nov. 18 at 12:00 GMT while will be followed by existing home sales, as of 15:00 GMT, which are estimated to record 2.2% drop in Nov. compared with a prior of 1.4%.

Thursday Dec. 22:

The U.K. will release 3q GDP final reading will be released at 09:30 GMT which is estimated to remain unrevised at 0.5% on the quarter and on the year.

Also, in the U.S. the main focus will be on the main highlight of the week which is GDP annualized for the third quarter (third reading), which is predicted to remain unrevised at 2.0%, where it will be available at 13:30 GMT, while personal consumption will also linger at 2.3%.

Moreover, initial jobless claims for the week ending Dec. 9 and continuing claims for the week ending Dec. 18 will also be available at 13:30 GMT. Thereafter, at 14:55 GMT, University of Michigan confidence will show a rise to 68.0 in Dec. from the prior 67.7.

Friday Dec. 23:

The week ends with the release of U.K. BBA loans for house purchase for the month of Nov. will be released at 09:30 GMT and the index of services for the Oct.

In the U.S., durable goods report which is predicted to show 2.1% advance in Nov. from the prior 0.7% drop will be out at 13:30 GMT.