GBP/USD gained 1.1% last week for a second successive week, as the pair closed the week above the 1.26 mark. The upcoming week has five events, including consumer inflation and employment data. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.
British Finance Minister Rishi Sunak presented a mini-Budget last week. It included a slash in VAT rates for the hospitality and food sectors and a suspension of a house purchase tax. As well, the mini-Budget has created programs to help youth unemployment. The UK construction sector got back on its feet in June, with a reading of 55.3. up from 28.9 beforehand. The 50-level separates contraction from expansion. The housing sector continues to struggle, as Halifax HPI declined by 0.1%. The index has failed to post a gain since February.
In the US, the services sector showed a strong rebound in June. The ISM Non-Manufacturing PMI jumped to 57.1, up from 45.4 beforehand. This reading showed significant expansion. Unemployment claims continue to fall, albeit at a slow rate. Last week’s reading was 1.31 million, down from 1.42 million. The Producer Price Index disappointed. The headline read came in at -0.2%, while Core PPI declined by -0.3%.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- BRC Retail Sales Monitor: Monday, 23:01. This indicator gauges consumer inflation in BRC shops. Retail sales climbed 7.9% in May, after a gain of 5.7% beforehand. Will the uptick continue in June?
- GDP: Tuesday, 6:00. The monthly GDP release made headlines last month, as the April release plunged by a staggering 20.4%, reflective of the severe economic conditions. Analysts are projecting a rebound in May, with a forecast of 5.0%.
- Inflation: Wednesday, 6:00. UK inflation started the year with inflation of 1.8%, but it’s been all downhill since then. In May, inflation slowed to 0.5%, down from 0.8% beforehand. Another reading of 0.5% is expected in the upcoming release.
- Employment Report: Thursday, 6:00. Unemployment has rocketed in the wake of the Covid-19 pandemic. In May, unemployment rolls fell to 528.9 thousand, down from 856.5 thousand beforehand. Wage growth fell from 2.4% to 1.0% and is expected to contract by 0.4%. The unemployment rate has hovered at 3.9% for two months in a row. It is projected to rise to 4.1%.
- BoE Credit Conditions Survey: Thursday, 8:30. The Bank of England’s quarterly report details lending conditions. Higher levels of debt may pose a risk but also imply confidence in the growth of the economy. The survey provides projections for the next three months.
Technical lines from top to bottom:
We start with resistance at 1.2905.
1.2850 is next.
1.2729 has held as resistance since mid-June.
1.2616 is fluid. Currently, it is an immediate resistance line.
1.2540 is the first line of support.
1.2330 follows has held in support since the end of June. It is the final line for now.
I am bearish on GBP/USD
The British economy has been hit hard by Covid-19. The government is scrambling to provide help to consumers and businesses, but economic conditions remain grim, which likely means a rough road ahead for the British pound.
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