GBP/USD: what's next?
Sterling spent the week trading mixed versus the greenback, forming a range of “doji” candlesticks on the daily chart. We remain clearly bearish in the medium-term as long as the cable holds below the major 1.5000 resistance. Next bearish targets are 1.4740, 1.4680 and 1.4630.
Next week’s highlights will be the Bank of England’s monetary policy decision as well as Services PMI and manufacturing production figures. The UK central bank is widely expected to leave rates unchanged in on Thursday. BOE became cautious amid low inflation and strong currency. According to the median Reuters forecast, the first rate hike will come in early 2016 and won’t exceed 25 bps. That means that the US Fed will likely be the first central bank to hike rates.
British pound’s prospects are clouded by political uncertainty. The upcoming UK general election on May 7 are not a sure thing: the Conservative party and the opposition Labor party are neck-and-neck. Threat of a “hung” government is a bearish factor for GBP: if Conservatives fail to win a majority, they’ll be trying to form a coalition.