GBP/USD Forecast July 15-19 – A busy week could shake up the pound

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GBP/USD showed little movement last week. Traders should be prepared for some movement from the pair, with the release of job data, inflation and consumer spending. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.

Key British data pointed upwards in May. GDP rebounded with a gain of 0.3%, after two successive declines. On the manufacturing sector, manufacturing production climbed 1.4%, after a sharp decline of 3.9% in April. This reading was well short of the forecast of 2.2%.

The Federal Reserve was in the spotlight last week, as Jerome Powell appeared before congressional and senate committees. Powell’s message was dovish, sending the U.S .dollar down and equity markets higher. Powell said the Fed was prepared to “act as appropriate” and noted his concern over low inflation and weak global conditions. Powell’s message has raised expectations of a rate cut later in July, and this was reiterated by the Federal Reserve minutes, which were dovish. The CME Group has priced a rate cut at 77%. On the inflation front, June data was mixed. The headline reading remained unchanged at 0.1%. Core CPI improved to 0.3%, its strongest gain since January 2018.

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

  1. UK Jobs Report: Tuesday, 8:30. Claimant count change, which is unemployment rolls, dropped to 23.2 thousand in May. The downward trend is expected to continue in June, with an estimate of 18.9 thousand. Wage growth slipped in April to 3.1%, its lowest level in 7 months. No change is expected in the May release. The unemployment rate is projected to stay pegged at 3.8% for a third successive month.
  2. UK Inflation: Wednesday, 8:30. CPI remains around the 2 percent level, which is the Bank of England’s inflation target. The May reading of 2.0% matched the estimate and no change is expected in the June release. Core CPI is expected to tick up to 1.8% in June, up from 1.7% a month earlier.
  3. Retail Sales: Thursday, 8:30. Retail sales is the primary gauge of consumer spending. The indicator has not managed a gain since March, pointing to weakness in consumer spending. The estimate for June stands at -0.3%.
  4. 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.
  5. Public Sector Net Borrowing: Friday, 8:30. The monthly deficit narrowed to GBP 4.5 billion in May, but missed the estimate of 3.3 billion. The forecast for June stands at GBP 3.4 billion.

* All times are GMT

GBP/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.2910. This line has held since mid-May.

1.2850 capped recovery attempts in late November.

1.2728 remained relevant last week.

1.2660 (mentioned last week) is next.

1.2590 has weakened in resistance following gains by GBP/USD last week. It was a swing low in September 2017.

The round number of 1.25. Further down is 1.2420.

1.2330 has provided support since March 2017.

The round number of 1.22 was an important support level in December 2016.

I remain neutral on GBP/USD

The British economy is in decent shape, but the dark cloud of Brexit will have to be addressed, with Britain due to leave the EU in three months time. The Fed is poised to cut rates as early as the July meeting, but with the markets pricing in a rate cut, the effect on the U.S. dollar could be minimal.

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About Author

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.

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