GBP/USD Forecast May 31-June 4 – PMI reports in focus

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GBP/USD posted slight gains last week, as the pair rose for a fourth consecutive week. The upcoming week has four releases. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, Public Sector Net Borrowing rose to GBP 31.0 billion in May, up from GBP 27.3 billion. The Confederation of British Industry Realized Sales index posted a second straight gain after a long streak of declines. The May reading of 18 was slightly down from the previous read of 20. 

BoE member Gertjan Vlieghe suggested that a rate hike could be on the table as soon as early next year. This sent the pound sharply higher on Thursday.                                                                                                     

In the US, Conference Board Consumer Confidence Consumer Confidence held steady in May, at 117.2. This was down marginally from 117.5 in April. Second-estimate GDP for the first quarter came in unchanged at 6.4%, confirming the initial reading.   

Unemployment claims fell to a new post-Covid low of 406 thousand, down from 444 thousand. Durable goods orders disappointed with a read of -1.3% in April, its second decline in three months.  The PCE index, the Fed’s preferred inflation gauge, jumped to 3.6% in April, up from 2.2%. This could lift the US dollar if investors believe that the Fed will re-evaluate whether to taper QE sooner rather than later.

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

  1. Manufacturing PMI: Tuesday, 8:30.  Manufacturing growth continues to accelerate and the PMI improved to 60.9 in April. The PMI is expected to rise sharply in May, with a consensus of 66.1. The neutral 50-level separates contraction from expansion.
  2. Net Lending to Individuals: Wednesday, 8:30. Credit levels shot up in April to GBP 11.3 billion, up from GBP 4.9 billion previously. The May estimate stands at GBP 7.4 billion.
  3. Services PMI: Thursday, 8:30. With the UK economy reopening, business activity has pointed higher. The PMI improved to 61.8 in April and an identical reading is projected for May.
  4. Construction PMI: Friday, 8:30. Construction continues to show strong growth. The PMI came in at 61.6 in April and is forecast to rise in May to 62.3.

1.4387 has provided resistance since June 2016.

1.4310 is next.

1.4231 is the next resistance line.

1.4154 is an immediate support level.

1.4075 (mentioned last week) follows.

1.3998 has provided support since early May.

1.3919 is the final support level for now.

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I remain bullish on GDP/USD

The pound remains at high levels and with the economic recovery gaining more traction, there is talk in the BoE of a tightening of policy, which is bullish for the pound.

Further reading:

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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.