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GBP/USD Forecast 08 July 2014

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Ignoring events in other countries, GBP/USD reached a new 6-year high

Pound has risen considerably in the week, reaching six-year highest point against the dollar. Currency was initially supported by expectations that Britain will raise rates in the second half this year. Previously presented report confirmed that the UK economy grew by 0.8% in the first three months of 2014.

We are waiting for secondary importance reporting for tomorrow, which would mean restrained reaction of the currency market. However, some releases are really worthy of attention, as they may offer additional discussion.

Consumer credit report in the U.S. is interesting, because there are unexpected trends: whereas until recently the main part of the loans were auto loans and student loans, then suddenly in April revolving credit rate increased to $8.8 billion. For comparison, the annual average rate on these loans was even including this amount, only $1.7 billion.

If the May report confirms a similar trend, it will state that the population is gradually re-enters the mode of consumption that can provide additional stimulus to the economy in the coming quarters.

Industrial production in May report will be published tomorrow in the UK, and if you remember the recent sharp rise in the June PMI manufacturing index and the rather weak performance in May, you can expect the unexpected turns. Projected figure should reach 3.1% vs. 3.0% a month earlier.

However, if the indicator again will exceed forecasts, we can expect another wave of demand for the GBP/USD with the immediate goal at around 1.7160 and further to 1.7200. So buying daily Call options from current price level 1.7130 is main scenario for 8th of July expiry.

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