GBPUSD Under Lot of Pressure, Holds Support

GBPUSD pair has been on a steady downtrend movement for nearly two weeks now and is currently seeing its largest weekly slide in over two months. The past week was especially disastrous to the pair as additional to weak economic data, dovish comments from BOE governor Carney caused GBP to hit new lows since its post Brexit high’s at 1.4376. Investors are on lookout for possible further downtrend movement in GBP over readings for preliminary Q1 GQP and also Carney is set to appear in Public once again.

GBPUSD Lower

The 200 pip fall of GBP last week was resulting from both economical and political factors. While economical factors include disappointing results in employment, inflation & sales figures, political factors include Carney’s BBC interview and EU’s decision to reject Theresa May’s Irish border proposals. If Pound manages to gain bull momentum during GDP update or Carney’s appearance then this downtrend movement will only be viewed as correction.

There is another possibility for bullish trigger as market sentiment for GBPUSD still remains positive among many investors. While the inflation data has been disappointing, UK inflation rose 2.5% over the year in March, missing the forecast of 2.6% y/y increase while core inflation decelerated to 2.3% y/y. The outlook for GBP/USD is formed by the Bank of England’s monetary policy and on balance, there is nothing from the recent data that alters the market view of the Bank of England hiking the Bank rate on May 10 this year.

Decelerating inflation is a fundamentally positive factor as it brings the UK inflation back closer to 2% inflation target set by the Bank of England helps real, inflation-adjusted wages return back to positive territory and supports the aggregate demand of households promoting growth. The view of the Bank of England hiking rates is the most fundamentally important cushion beneath current slide of Sterling on its long-term crawl higher. So while the current market trend is bearish, any real impact of currency’s growth can only be truly viewed post monetary policy update till which the possibility for GBP to see further gains or loss is truly 50/50.