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The British Pound has recovered nicely, and played with 1.50. Next week’s major indicators will play a crucial role in the direction of the Pound.

GBP/USD has traded above the magical 1.50 line for the first time since the beginning of the year. This shows the strength of cable. On April 3rd, I gathered the good news in Britain and wrote about the Comeback of the Pound. Here are some figures from that time:

  • Manufacturing PMI made a big surprise by rising to 39.1, rather than 34.9
  • Nationwide HPI  made the biggest surprise  by rising 0.9% rather than falling. British real estate climbing? Really?
  • Services PMI rose to 45.5 instead of 43.6 that was expected.

Since then, the Pound has traded in a limited range. In the past week, after the Easter holiday, hardly any economic indicators were released in Britain. Still, the Pound topped the major psychological resistance line of 1.50, and peaked at 1.5065. Since then, it retreated back to 1.48, alongside other currencies that bowed before the dollar on Friday.

But next week is different: there are a many major economic indicators in the UK:

  • CPI  on Tuesday – expected to rise by 2.9% (annually adjusted). Contrary to other Western nations, Britain doesn’t suffer from deflation.
  • Claimant Count Change on Wednesday – this is the earliest and most important unemployment figure in Britain, and a major market mover. Expected to rise by 117K.
  • MPC Meeting Minutes – also on Wednesday – What were the British economic architects thinking about in their last meeting? Where do they see the economy going?
  • Prelim GDP – On Friday. The British economy is expected to show a contraction of 1.5%. This is the earliest and most important GDP release.
  • Retail Sales – On Friday, at the same time as the Prelim GDP. This important economic indicator is expected to drop by 0.3%. Since it’s published at the same time as the GDP, 8:30 GMT, the Pound will shake, and end the week with a blast.

All these major economic indicators in Britain will set the direction of the Pound. It might continue its comeback, and rise over 1.50, this time to stay.  

On the other hand, these figures can show us that the British economy is still suffering terribly, and that the current spring rally was only temporary.

For those of you trading on the cable, on of the most popular currency pairs, you may expect an exciting week. Also do note the EUR/GBP pair, that has drifted away from parity, yet again.

Further Reading: James Chen wrote an interesting technical analysis on the British Pound.

A full Forex Weekly Outlook (for all currencies) will be published on Sunday.

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