GBP cost dynamics is an effective complex indicator of political and economic processes in the state. The slightest optimistic forecasts increase its value, and unfavorable expectations make the price curve creep down. Thus, the financial market immediately reacted to the news of the resignation of Prime Minister Liz Truss by strengthening the pound sterling. To what extent can such events significantly affect the value of the national currency? Understanding which reports should be analyzed for making a GBP forecast allows investors to build their strategies accurately. By tracking all the trends presented in the reports on their own and with the help of Capital.com, traders will assess risks correctly and see emerging optimistic prospects.
Macroeconomic Indicators to Pay Attention to
The value of the currency reflects the overall assessment of the prospects for the national economy. Therefore, the attention in the building of the GBP forecast should be given to macroeconomic indicators.
They evaluate the general state of the economy and its ability to grow. Among the essential macroeconomic indicators that predict the cost of GBP and other currencies, it is necessary to consider the following:
- dynamics of gross domestic product (GDP)
- inflation rate
- the state of the manufacturing and service sector
- interest rates
- unemployment rate
- labor market and real estate
- demand indicators
Reports to Study for Trend Prediction
To make successful financial deals and correct the GBP forecast, identify reports that you need to review regularly. Helping traders and investors navigate the often implicit economic processes, indices provide reliable support in making important investment decisions.
Consumer Price Index
The monitoring of the Consumer Price Index is essential for assessing inflationary trends, which are indispensable in making a GBP forecast. It shows price fluctuations for the same groups of goods and can signal unfavorable or positive trends.
Nationwide Consumer Confidence Index (NCCI)
These reports allow you to predict consumer spending:
- When consumer sentiment is pessimistic, they prefer saving strategies in anticipation of worse days.
- When they are confident in a well-functioning economy and stability, they tend to spend more.
Therefore, if the real value of the index is higher than expected, this indicates a trend toward an increase in the value of the currency. If it is lower, then the GBP forecast should assume a bearish trend.
Monetary Policy of the Bank of England
The monetary policy of the state has a significant impact on curbing inflationary trends. By raising the interest rates, the Bank of England can reduce inflation, which is good for the GBP prospects. By applying this and many other tools for monetary policy, the Bank of England can stabilize the economy and strengthen the national currency. Following its decisions, you can correct your GBP forecast.
Analyzing the UK trade deficit or surplus allows you to estimate the outflow or inflow of capital into the country. When a nation imports more than it sells for export, there is an outflow of capital. It adversely affects the price, and hence the GBP forecast.
Gross Domestic Product (GDP)
This indicator is one of the most important in assessing the state of the country’s economy and making a GBP forecast. If production levels and demand for goods made in the UK are high, this entails a rising demand for its currency. As a result, there is an increase in GBP value in the foreign exchange markets.
Considering and comparing the above reports, traders can easily anticipate upcoming trends and change their strategies. It does not mean that other indicators should be neglected. The more comprehensive your analysis is, the more complex the picture of the future you will see. It means that your GBP forecast will reflect the future reality as accurately as possible.