Browsing: GBP USD Forecast

GBP/USD climbed close to 1 percent last week, reversing the losses seen a week prior. The upcoming week has five releases. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, the economy posted a modest gain of 0.4% in February. Manufacturing Production rebounded with a gain of 1.3% in February, well above the estimate of 0.5%.
In the US, CPI rose in March, but the reaction of the US dollar was muted. Headline CPI climbed from 0.4% to 0.6% and Core CPI improved to 0.3%, up from 0.1%. Retail sales soared in March – headline retail sales came in at 9.8% and the core reading rose 8.4%, well above the forecast.
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GBP/USD daily chart with support and resistance lines on it. Click to enlarge:

  1. Employment Report: Tuesday, 6:00.  Wage growth has been at high levels. In January, wage growth came in at 4.8% and the estimate for February stands at 4.7%. Claimant Change jumped to 86.6 thousand in February and is expected to fall to 24.5 thousand in March.
  2. Inflation: Wednesday, 6:00. With lockdown restrictions easing, inflation is expected to move higher. Headline CPI is projected to rise from 0.8% in March, up from 0.4%, while Core CPI is expected to climb from 0.9% to 1.1%.  
  3. CBI Industrial Order Expectations: Thursday, 10:00. Sales order volume is expected to increase for the first time in two years, with an estimate of 3 for the April release. In March, the indicator came in at -5 points.
  4. GfK Consumer Confidence: Thursday, 23:01. The UK consumer remains pessimistic, but the index is showing improvement. The March reading came in at -16 and the consensus for April stands at -12.
  5. Retail Sales: Friday, 6:00. Retail sales bounced back in February, with a gain of 2.1%. The estimate for March is 1.5%.
  6. Manufacturing PMI: Friday, 8:30. Manufacturing continues to show strong growth, well above the 50-level which separates contraction from expansion. The forecast for April stands at 59.0.
  7. Services PMI: Friday, 8:30. Services moved back to expansionary territory in February, rising from 49.7 to 56.8. The upswing is expected to continue in March, with an estimate of 58.6.

Technical lines from top to bottom:

We start with resistance at 1.4036.

1.3944 is next.

1.3824 has switched to resistance after the pound sustained sharp losses last week.

1.3699 is an immediate line of support.

1.3582 (mentioned last week) is the final support level for now.

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I am neutral on GBP/USD

The US economy continues to signal a strong recovery, with strong employment and retail sales numbers. The UK economy is also headed in the right direction, as the government continues to lift health restrictions.

Further reading:

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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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