GBP/USD Price Forecast – Sterling Holds Fort Despite Mixed Macro Data

The British pound continues to have an uneventful week. In Wednesday’s North American trade, GBP/USD was trading at 1.3378 up 0.04% on the day and continues to climb up currently moving in 1.339 handle. Mixed macro data yesterday despite positive PPI data fails to increase probability of a rate hike by British central bank later this month. Wage growth in the U.K continues to lag behind inflation, which is hampering consumer spending. The labor market remains tight, but surprisingly, this has not translated into stronger wages for British workers. Where does this leave the Bank of England? Policymakers will remain hesitant to raise interest rates, unless inflation reverses its downward trend and key economic indicators move higher. The BoE will convene on June 21 for a policy meeting, and the bank is expected to hold the benchmark rate at 0.50 percent.

GBPUSD Doesn’t Show Any Impact

GBP traded in a volatile manner yesterday swinging between a 1.3309/1.3390 range before ending the day largely unchanged (close at 1.3377). The messy price action has resulted in a mixed outlook and further choppy trading is expected from here, albeit likely at a higher range of 1.3340/1.3425. The latest Brexit vote in the House of Lords tipped towards a tougher Brexit scenario after Prime Minister Theresa May managed to win the vote at the last minute, eliminating some of the British parliament’s ability to step into Brexit negotiations if a preliminary vote in August fails. Overall the uptrend movement that pair experienced last week is back up again now that investors focus has shifted away from US Fed and US Greenback’s momentum has faded.

On release front, UK’ calendar saw Core PPI YoY Output for May and Core RPI MoM for May decline while Core PPI MoM Output for May and Core RPI YoY for May remain unchanged, CPI data also remained unchanged while YoY House price index saw dovish output. PPI Input and PPI output data had better than expected readings. Today’s calendar is set to see release of Retail sales data in both sides of the pair and the pair is expected to test 1.340 handle during London and North American market hours if ECB confirms QE tapering process there by weakening US Greenback’s momentum even further. Expected support and resistance for the pair are at 1.3310 / 1.3265 / 1.3220 and 1.3345 / 1.3390 / 1.3420 respectively.