GBPUSD Opens Flat for the Week As Both Sides Are on Holiday

The GBP/USD is trading up towards 1.3350 as the pair moves through a quiet Monday session. The Sterling-Dollar pairing is going to see a very quiet Monday, with the US off for Memorial Day and the UK also extending the weekend for the Spring Bank Holiday. With both major markets shuttered for the week’s beginning, the pair will see very low volatility today and the economic calendar remains thin for most of the week as well. The first release for the UK hits on Wednesday and with Non-Farm Payrolls on Friday, Investors will be watchful for any and all cues that could lead to some volatility across the week.

GBPUSD Stable

The GBP/USD was trading near its cyclical lows of 1.3305 at the end of the fourth week of May after the set of important macro data during the week failed to support it against the US Dollar. The macro picture in the UK is framed by two important trends, slowing economic growth and decelerating inflation. The UK inflation is approaching the Bank of England 2% inflation target faster than originally predicted in support of the real, inflation-adjusted wages while the economic growth is almost stagnant in the first quarter of this year. However both measures support the argument of the Bank of England staying pat on the Bank rate with the market forecasting 0.25% Bank rate hike in February on 2019 based on effective money market rates.

Decelerating inflation is Sterling negative as it buys the Bank of England time before it has to act on interest rates. The Bank of England Governor and the Monetary Policy Committee (MPC) external member Gertjan Vlieghe both shared their outlook for the monetary policy saying “interest rates in the UK will go up very gradually over the next few years”. The daily chart for the pair shows that, after a period of consolidation at the beginning of the month, it resumed its bearish trend that has not yet found a bottom, as technical indicators accelerated their slides, the momentum indicators saw modest easing.  Expected support and resistance for the pair are at 1.3280 / 1.3245 and 1.3365 / 1.3400 respectively.