- Sterling bulls' hopes for a May rate hike dashed against the rocks of a souring UK economy.
- UK PMIs this week promise little shelter for fleeing Sterling traders.
The Sterling is trading quietly in Monday's early session, cycling around 1.3775 after Friday's dump saw the GBP shed nearly two hundred pips against the Greenback.
The GBP/USD accelerated recent losses to cap off last week following a GDP release with the worst growth figure in five years, with the UK's quarterly GDP printing at 0.1% versus the expected 0.5%. A new week begins with the Sterling having fallen over four percent since April's high of 1.4375.
Monday's European session is a decidedly quiet affair for the GBP with nothing scheduled on the economic calendar, but the GBP's recent rout is a warning sign for would-be bullish traders as the Bank of England (BoE) heads into their next rate call, and it looks increasingly like the BoE is going to have to hold off on a May rate increase, which was priced in on traders' expectations of a rate hike, and now looks unlikely to happen following a vicious cycle of worse-than-expected macro figures for the UK's economy within recent weeks.
GBP/USD Weekly Forecast: With UK economy decelerating, rate hike in May is a joking option
Markit Manufacturing and Services PMIs are scattered throughout the week, beginning with the Markit Manufacturing PMI on Tuesday at 08:30 GMT (forecast 55.3, prev. 55.1). A continued piling-up of drooping figures for the UK will continue to punish the Sterling moving forward, but first the US session will see the Core Personal Consumption Price Index on Monday at 12:30 GMT (expected 1.8%, prev. 1.6) which could derail the GBP against the Greenback early if the figures beat expectations.
GBP/USD analysis: UK data disappointed big, no rate hike at sight
GBP/USD Levels to watch
Evaporated expectations for a rate hike from the BoE in May and swooning macro figures for the UK's economy are looking set to continue hammering the Sterling, and as FXStreet's Chief Analyst Valeria Bednarik noted, "the GBP/USD pair is technically bearish according to the daily chart, as the pair settled far below its 20 DMA, which slowly gyrates south, while technical indicators maintain their strong downward slopes near oversold readings. Shorter term, and according to the 4 hours chart, the risk is also leaned to the downside, as a bearish 20 SMA has been steadily capping the upside, now around 1.3900, while technical indicators stalled their recoveries from extreme oversold levels and the RSI already turned south, currently at 23. The pair bottomed at 1.3746 last Friday, making of the level and immediate support and the one to break to confirm additional declines ahead."
Support levels: 1.3745 1.3710 1.3680
Resistance levels: 1.3820 1.3860 1.3900
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.