Browsing: GBP USD Forecast

GBP/USD posted slight gains last week, as the pair rose for a fourth consecutive week. The upcoming week has four releases. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, Public Sector Net Borrowing rose to GBP 31.0 billion in May, up from GBP 27.3 billion. The Confederation of British Industry Realized Sales index posted a second straight gain after a long streak of declines. The May reading of 18 was slightly down from the previous read of 20. 

BoE member Gertjan Vlieghe suggested that a rate hike could be on the table as soon as early next year. This sent the pound sharply higher on Thursday.                                                                                                     

In the US, Conference Board Consumer Confidence Consumer Confidence held steady in May, at 117.2. This was down marginally from 117.5 in April. Second-estimate GDP for the first quarter came in unchanged at 6.4%, confirming the initial reading.   

Unemployment claims fell to a new post-Covid low of 406 thousand, down from 444 thousand. Durable goods orders disappointed with a read of -1.3% in April, its second decline in three months.  The PCE index, the Fed’s preferred inflation gauge, jumped to 3.6% in April, up from 2.2%. This could lift the US dollar if investors believe that the Fed will re-evaluate whether to taper QE sooner rather than later.

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

  1. Manufacturing PMI: Tuesday, 8:30.  Manufacturing growth continues to accelerate and the PMI improved to 60.9 in April. The PMI is expected to rise sharply in May, with a consensus of 66.1. The neutral 50-level separates contraction from expansion.
  2. Net Lending to Individuals: Wednesday, 8:30. Credit levels shot up in April to GBP 11.3 billion, up from GBP 4.9 billion previously. The May estimate stands at GBP 7.4 billion.
  3. Services PMI: Thursday, 8:30. With the UK economy reopening, business activity has pointed higher. The PMI improved to 61.8 in April and an identical reading is projected for May.
  4. Construction PMI: Friday, 8:30. Construction continues to show strong growth. The PMI came in at 61.6 in April and is forecast to rise in May to 62.3.

1.4387 has provided resistance since June 2016.

1.4310 is next.

1.4231 is the next resistance line.

1.4154 is an immediate support level.

1.4075 (mentioned last week) follows.

1.3998 has provided support since early May.

1.3919 is the final support level for now.

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I remain bullish on GDP/USD

The pound remains at high levels and with the economic recovery gaining more traction, there is talk in the BoE of a tightening of policy, which is bullish for the pound.

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GBP/USD Forecast and technical analysis ► preview of the main events that move the British Pound (Sterling), and especially pound/dollar (cable) during the week. Here are some general data. Scroll down for the latest GBP/USD outlook

Pound/dollar characteristics

GBP/USD is a major pair and certainly one of the first to emerge in modern trade. Its nickname “cable” originates from transmitting the exchange rate over the telegraph cable between the UK and the USA in the 19th century.

Above average volatility characterizes pound/greenback trading. In comparison to other major pairs, stop-loss orders are usually placed at wider margins.

Another tidbit of Sterling trading is that the pair “front-runs” economic publications from Great Britain. We usually see a significant market movement ahead of a release. Leaks, rumors, or sheer nervousness move GBP USD

The pound is a moderate “risk” currency. When the global mood is positive, GBP often gains against the dollar, albeit usually not at the same magnitude as commodity currencies. When markets become risk-averse, Sterling is on the retreat.

Brexit talks and GBP/USD

The biggest market mover of GBP/USD is the surprising decision of voters in the United Kingdom to leave the European Union. This unprecedented move shook up  Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985 and despite the recovery, Sterling still suffers.

The economy did well in 2016, before and after the EU Referendum, but it slowed down in 2017. On the other hand, the weak pound pushed inflation above the rises in wages. The Bank of England decided to raise rates in November 2017 but clarified it is a one-off. Mark Carney and his colleagues foresee only two hikes in the next three years.

Brexit negotiations were deadlocked for quite some time, but fresh hopes help the pound stabilize. PM Theresa May may agree to pay the high “divorce bill” that the EU demands.

Latest weekly GBP/USD forecast:

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