Search ForexCrunch
  • The British Pound rose after the NFP showed weakness in unemployment data. 
  • Overall, the GBP/USD remains in negative territory amid Fed’s hawkishness. 
  • UK GDP and reopening of economy are major variables to determine the next leg of the pair. 

The Greenback rally is continuing to press the major currencies because of Fed’s hawkish stance and virus fears. The GBP/USD pair struggled to post any gains in the week and tested mid-April lows near 1.3730.

Fed’s hawkishness

Fed’s tone is getting more hawkish as Fed Governor Christopher Waller reinforced cutting the bond-buying program sooner than expected. Earlier, Robert Kaplan was a supporter of reducing bond-buying.

US data front

US ISM Manufacturing Purchasing Managers Index data missed the estimates, but weekly jobless claims and ADP data came better than expected.

Finally, the US NFP data provided a sigh of relief to the GBP/USD. While the US added 850k more jobs in June, the wage growth showed stability at 3.6%. However, the unemployment figures increased to 5.9%, while earlier figures were at 5.8%. This triggered profit taking in US Dollar. The GBP/USD pair surged more than 90 pips after the data.

Reopening of UK economy

The newly appointed Health Secretary of the UK, Sajid Javid, reiterated that the reopening of the economy is still intact. He is optimistic about loosening the restrictions on 19th July despite the recent rise in cases and hospitalization. However, he warned that coming winters could be worse for the UK.

Bank of England and GDP

The British Pound got some support from the Bank of England, a BOE’s Bailey discussed prospects to combat the rising inflation. However, his comments about the rate forecast were a little dovish.

The UK’s GDP expectations for Q1 revised lower to 1.6% as it missed many estimates.

GBP/USD: What’s next to watch?

The key decision that can significantly impact the British Pound is whether the UK govt will reopen the economy on 19th July or defer the decision. The fast spread of the Delta variant can trigger extension to the lockdown. Although 2/3 of the public has been vaccinated, the new variant is more deadly and may hinder the reopening. So, the UK’s monthly GDP can be a serious event next week that can provide fresh impetus to the market.

On the other hand, Fed meeting minutes and ISM survey can also trigger volatility in the pair.

GBP/USD Technical forecast for the week

The 4-hour chart of the GBP/USD shows a great comeback as the price closed above the 20-period SMA. The volume is also rising with the price rise, which indicates more upside potential. On the daily chart, the price remains protected by 200-day SMA and April swing lows. However, the 200-day SMA is flat, which shows the neutrality of the pair. Furthermore, the 20 and 50 day SMAs are very close to each other and neutral to a bullish stance.

daily chart of GBP/USD
Daily chart of GBP/USD

Looking to trade forex now? Invest at eToro!

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.