GBP/USD – British Pound Under Pressure as Rate Hike Could be Delayed

The British pound is down slightly in the Monday session, after recording sharp losses on Friday. In North American trade, the pair is trading at 1.3765, down 0.13% on the day. On the release front, there are no British events on the schedule. In the US, Personal Spending improved to 0.4%, matching the forecast. This marked a 3-month high. The news was not as positive from the housing sector, as Pending Home Sales dropped to 0.4%, down sharply from 3.1% in the previous release. On Tuesday, the both the UK and the US release Manufacturing PMI reports.

British Preliminary GDP for the first quarter disappointed last week, with a paltry gain of 0.1%. This missed the estimate of 0.3%, and was well short of Final GDP for Q4, which came in at 0.4%. The poor performance of the economy in the first quarter has dampened expectations that the BoE will raise rates at the upcoming May rate meeting, with the odds of a hike plunging to 20%, compared to 90% at the beginning of April. Most analysts expect the BoE to delay a rate hike until the second half of the year, with August or November being the most likely months for a rate hike. This sentiment sent the pound lower on Friday and the currency declined 1.6% last week. Currently, GDP/USD is trading at its lowest level since the end of February.

US indicators ended the week with the first GDP report for the first quarter. Advance GDP posted a respectable gain of 2.3% which beat the estimate of 2.0 percent. Still, this was a significant drop from GDP in the fourth quarter of 2018, which came in at 2.8 percent. Analysts also took note of the Employment Cost Index, which rose from 0.6% to 0.8%, another indication that inflation is moving higher. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers continue to project a total of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the US dollar could continue to make headway against its major rivals, including the Japanese yen.

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GBP/USD Fundamentals

 Monday (April 30)

  • 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
  • 8:30 US Personal Spending. Estimate 0.4%. Actual 0.4%
  • 8:30 US Personal Income. Estimate 0.4%. Actual 0.3%
  • 9:45 US Chicago PMI. Estimate 58.2. Actual 57.6
  • 10:00 US Pending Home Sales. Estimate 0.6%. Actual 0.4%

Tuesday (May 1)

  • 4:30 British Manufacturing PMI. Estimate 54.9
  • 4:30 British Net Lending to Individuals. Estimate 4.9B
  • 10:00 US ISM Manufacturing PMI. Estimate 58.6

*All release times are DST

*Key events are in bold

GBP/USD for Monday, April 30, 2018

GBP/USD April 30 at 11:50 DST

Open: 1.3782 High: 1.3792 Low: 1.3713 Close: 1.3752

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3494 1.3613 1.3712 1.3796 1.3901 1.4010

GBP/USD inched higher in the Asian session. The pair lost ground in European trade but has recovered most of these losses in the North American session

  • 1.3712 is providing support
  • 1.3796 is the next resistance line
  • Current range: 1.3712 to 1.3796

Further levels in both directions:

  • Below: 1.3712, 1.3613, and 1.3494
  • Above: 1.3796, 1.3901, 1.4010 and 1.4128

OANDA’s Open Positions Ratio

GBP/USD ratio is showing slight movement towards long positions, which currently have a majority (55%). This is indicative of trader bias towards GBP/USD reversing directions and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.