GBP/USD – Pound punches to 2-week high, BoE decision looms

GBP/USD continues to move higher this week. In North American trade, GBP/USD is trading at 1.3070, up 0.28% on the day. On the release front, British BRC Shop Price Index slowed to 0.4% in April, after a strong gain of 0.9% in the March release. British manufacturing PMI dropped to 53.2, just above the estimate of 53.1. points. Net Lending to Individuals improved to GBP 4.7 billion, above the estimate of GBP 4.5 billion. In the U.S., ADP nonfarm payrolls sparkled with a gain of 275 thousand, crushing the forecast of 181 thousand. ISM Manufacturing PMI is expected to drop to 55.0 points. The spotlight will be on the Federal Reserve, which releases its rate statement. On Thursday, the U.K. releases Construction PMI and the Bank of England will set the benchmark rate. In the U.S., the highlight is unemployment claims.

The Federal Reserve is expected to stay on the sidelines and maintain rates at a range between 2.25-2.50 percent. Investors will be focused on the rate statement, looking for clues regarding the next rate move. The Federal Reserve has said it expects to hold interest rate levels for the rest of the year, and the most recent inflation numbers will reinforce that stance, as the Fed target of 2.0% remains elusive. The Core PCE Price Index, which is the Federal Reserve’s preferred gauge for inflation, came in at 0.0% in March and 0.1% in February (the two events were released on Tuesday due to the government shutdown earlier this year). On an annualized basis, the indicator gained 1.6%, just shy of the estimate of 1.7%. GDP and consumer spending are looking bright, but nonetheless there is no danger of the economy overheating, so the Fed can afford to leave rates at the current level for the near future.

The pound has jumped 1.3% this week and GBP/USD is at its highest level since April 16. Investors are hoping that the BoE rate decision will not rain on the cable party. The bank holds a policy meeting on Thursday, and is expected to maintain rates at 0.75% for a seventh successive month. However, a dovish policy summary could weigh on investor sentiment and push the pound lower. Recent British numbers have been lukewarm, and Brexit will continue to weigh on the pound, even with the extension until October. Consumers remain pessimistic about the economic outlook and uncertainty over Brexit, and this gloomy mood has also affected consumer spending.

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Will the U.S dollar get the Fed’s help?

GBP/USD Fundamentals

Tuesday (April 30)

• 19:01 British BRC Shop Price Index. Actual 0.4%
  

Wednesday (May 1)

• 1:55 British Nationwide HPI. Estimate 0.1%. Actual 0.4%
  
• 4:30 British Manufacturing PMI. Estimate 53.2. Actual 53.1
  
• 4:30 British Net Lending to Individuals. Estimate 4.5B. Actual 4.7B
  
• 4:30 British M4 Money Supply. Estimate 0.3%. Actual -0.5%
• 4:30 British Mortgage Approvals. Estimate 64K. Actual 62K
• 8:15 US ADP Nonfarm Employment Change. Estimate 181K. Actual 275K
  
• 9:45 US Final Manufacturing PMI. Estimate 52.4
• 10:00 US ISM Manufacturing PMI. Estimate 55.0
• 10:00 US Construction Spending. Estimate 0.3%
• 10:00 US ISM Manufacturing Prices. Estimate 54.5
• 10:30 US Crude Oil Inventories. Estimate 1.3M
• All Day – US Total Vehicle Sales. Estimate 17.1M
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <2.50%
• 14:00 FOMC Press Conference

Thursday (May 2)

• 4:30 British Construction PMI. Estimate 50.4
• 7:00 BoE Inflation Report
• 7:00 BoE Official Bank Rate Votes. 0-0-9
• 7:00 BoE Monetary Policy Summary
• 7:00 BoE Official Bank Rate. Estimate 0.75%
• 7:00 BoE Asset Purchase Facility. Estimate 435B
• 7:00 BoE Asset Purchase Facility Votes. Estimate 0-0-9
• 8:30 US Unemployment Claims. Estimate 220K
• Tentative – Treasury Currency Report

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, May 1, 2019

GBP/USD May 1 at 8:20 DST

Open: 1.3034 High: 1.3076 Low: 1.3030 Close: 1.3066

GBP/USD Technical

GBP/USD was flat in the Asian session and has posted slight gains in European trade

• 1.2910 is providing support
• 1.3070 is a weak resistance line. It was tested earlier in the session
• Current range: 1.2910 to 1.3070

Further levels in both directions:

• Below: 1.2910, 1.2841 and 1.2729
• Above: 1.3070, 1.3170, 1.3258 and 1.3362

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