GBP/USD Weekly Forecast - 23 April

Saturday, Apr 21 2018

GBP/USD had a bad week when everything went wrong for the pound. After hardly holding onto 1.40, sterling now faces the GDP report and another public appearance by Mark Carney.

The bad news began with wages that remained stagnant at 2.8%, short of a rise to 3% and alongside a rise in jobless claims. The second disappointment came from inflation, which fell to 2.5%, lowering the urge for a rate hike. Retail sales fell by 1.2%, double the early expectations providing the third reason to sell the pound. After the economic data came Carney’s BBC interview. He said that interest rates will rise in the next few years but hinted that the next move may not necessarily be in May. The fifth and last blow came from Brexit issues. The House of Lords voted to make changes to the Brexit Bill by a huge majority and the Irish border issue is a very thorny one without any relief so far. So, GBP/USD rose to 1.4376, the highest since June 2016, only to tumble nearly 400 pips from the highs. In the US, the dollar enjoyed higher yields, a result of good data and ongoing eagerness from the Fed to raise rates. Williams’ optimism stood out.

Major events in the coming week:

Public Sector Net Borrowing: Tuesday, 8:30. Net borrowing by the central / local governments will change from negative 0.3 billion pounds (i.e. surplus) to a net borrowing of 1.1 billion.
CBI Industrial Order Expectations: Tuesday, 10:00.
High Street Lending: Thursday, 8:30. The mortgages approved by this group represent around two-third of mortgages in the UK. Expecting a slide from 38.1K in February to 37.1K in March.
CBI Realized Sales: Thursday, 10:00. After a plunge to -8 points, a small recovery to -3 is forecast.
GfK Consumer Confidence: Thursday, 23:01. Expected to reflect pessimism among consumers.
Nationwide HPI: Friday, 6:00. The second-earliest report on house prices has shown a second consecutive fall in the value of homes in March, by 0.2%. A bounce could be seen now.
GDP (first read): Friday, 8:30. After enjoying an expansion of 0.4% q/q in the last quarter of 2017, a slowdown is on the cards for Q1 2018: 0.3% q/q.
Mark Carney talks: Friday, 14:00. The BoE Governor will speak at the launch of the BOE’s econoME education program. Carney may provide further insights about the economy.