GBP/USD Forecast May 3-7 – Will BoE signal that a taper is on the way?

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GBP/USD dropped sharply late in the week and the pair ended the week just above the 1.38 line. The upcoming week has four releases, including the BoE rate decision. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

The  Confederation of British Industry Realized Sales report finally punched into positive territory after six straight declines. Sales volume rose to +20 in April, up from -45 points. This easily beat the estimate of +9.

In the US, consumer confidence soared, as the Consumer Board Consumer Confidence Index climbed to 121.7, up from 113.1 beforehand. The US dollar dipped after the FOMC meeting, as the Fed said it was premature to discuss tapering.

US GDP rose 6.4%, beating the forecast of 6.1%. The robust reading was another sign that the US economic recovery is in full swing.

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

  1. Manufacturing PMI: Tuesday, 8:30. Manufacturing continues to show strong growth. The PMI rose to 60.7 in April, up from 58.9. The upcoming reading is expected to confirm the initial release. 
  2. Services PMI: Thursday, 8:30. The index continues to accelerate as the UK economy reopens. The PMI rose to 60.1 in April, and the second estimate stands at 60.2 points. 
  3. BoE Rate Decision: Thursday, 12:00. The BoE is widely expected to maintain the Official Cash Rate at 0.10% and asset purchases at GBP 895 billion. The economy is doing markedly better than the last meeting, which took place in March, due to a successful vaccine rollout. The bank is not expected to taper at the upcoming meeting, but if policymakers do make this move, the pound could rise significantly. The BoE is expected to maintain interest rates at 0.10%.
  4. Construction PMI: Tuesday, 8:30. Construction accelerated in March, rising from 53.3 to 61.7 points. The estimate for April stands at 62.0, which points to strong growth.

Technical lines from top to bottom:

We start with resistance at 1.4070.

1.3956 is next.

1.3824 (mentioned last week) is the first support level.

1.3726 is next.

1.3612  is the final support level for now.

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I am neutral on GBP/USD

Both the US and UK economies continue to show improvement. If the BoE tapers or hints at tighter policy, the pound could get a big lift this week.

Further reading:

Get the 5 most predictable currency pairs

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.