Home GBP/USD Forecast May 8-12

GBP/USD  posted small gains last week, closing at 1.2970.  This week’s key events are Manufacturing Production and the Official Bank Rate.  Here is an outlook for  the highlights of this week and an updated technical analysis for GBP/USD.  

In the US,  the Fed left rates unchanged but the rate statement was more hawkish than expected. In the UK, all three PMI reports beat their estimates, but this wasn’t enough to push the British pound higher.

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GBP/USD graph with support and resistance lines on it. Click to enlarge:

  1. Halifax HPI: Monday, 7:30. This house inflation report helps analysts gauge the strength of the housing sector. The indicator edged lower to 0.0% in March, shy of the forecast of 0.2%. The estimate for April stands at 0.1%.
  2. BRC Retail Sales Monitor: Monday, 23:01. This indicator has now contracted for three straight months, pointing to softer consumer spending. Will we see a gain in the April report?
  3. RICS House Price Balance: Wednesday, 23:01: The indicator dipped to 22% in March, matching the forecast. The downward trend is expected to continue in April, with an estimate of 20%.
  4. Manufacturing Production: Thursday, 8:30.  This  is the first key event of the week. The indicator has run into some trouble, posting two consecutive declines. Another decline is expected in March, with a forecast of -0.2%.
  5. Goods Trade Balance:  Thursday, 8:30. The UK trade deficit ballooned to GBP 12.5 billion, higher than the estimate of a deficit of GBP 10.9 billion. The deficit is expected to narrow to GBP 11.6 billion in the April report.
  6. BoE inflation Report:  Thursday, 11:00. This report is released twice a year and should be treated as a market-mover. The report details the BoE’s forecast for inflation and economic conditions for the next two years, and analysts will be looking for clues regarding future monetary policy.
  7. Monetary Policy Summary:  Thursday, 11:00.  This summary is released on a monthly basis. The report contains discusses economic conditions and could provide clues about the BoE’s future monetary policy.
  8. Official Bank Rate:  Thursday, 11:00. The BoE is expected to maintain rates at  0.25%. The MPC will release the vote breakdown for the February rate decision, when the bank held rates. The markets are predicting that the vote for that decision was 8-1 in favor of maintaining the rate, with one vote in calling for the rate to be raised to 0.50%.
  9. Asset Purchase Facility:  Thursday, 11:00.  The BoE’s asset-purchase program is expected to remain at 435 billion pounds. The voting breakdown for the March decision (which remained at 435 billion pounds) is expected to be a unanimous 9-0 vote.
  10. NIESR GDP Estimate:  Thursday, 12:00. This monthly indicator helps analysts predict GDP, which is released every quarter. The indicator edged down to 0.5% in March, its weakest gain since December 2016.

*All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2931. The pair dropped to a low of 1.2828 late in the week, before recovering and climbing to a high of 1.2984,as resistance held at 1.3020 (discussed last week). GBP/USD closed the week at 1.2969.

Technical lines from top to bottom

1.3347 has held in resistance since September 2016.

1.3247 is next.

1.3112 marked a low point in June 2016 as the pound crashed after the Brexit vote.

1.3020 was tested in resistance last weak. It is an immediate line.

1.2902 is providing support.

1.2775 is the next support level.

1.2548 is the final support level for now.

I am bearish on GBP/USD.

The Fed statement was more hawkish than expected, increasing the likelihood of a June rate hike. The US economy hit some turbulence in Q1, but the economy remains strong, as does sentiment in favor of the US dollar.

Our latest podcast is titled  US economic unease and slippery oil

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.