GBP/USD: outlook for August 1-7
Last week British pound managed to hold its ground versus the US dollar. The Bank of England’s policymaker Martin Weale, who used to think that the BOE should raise rates sooner than later, said he sees the economic outlook differently after PMIs showed that UK economy contracted in July at its fastest rate since the beginning of 2009. However, GDP growth for Q2 was rather good despite the Brexit referendum in June: British economy rose by 0.6% beating the 0.4% growth forecast.
The Bank of England will meet on Thursday. The regulator is expected to cut interest rates from 0.50% to 0.25%, though most experts think that the central bank won’t revive its massive bond-buying program for now. The market is ready for such outcome: according to overnight swaps rate, a rate 30 basis points is already priced in. It means that the Bank of England will have to deliver much more easing for the British pound to fall, especially as the US dollar is not feeling particularly well. Apart from the Bank of England’s meeting pay attention to British PMIs on Monday, Tuesday and Wednesday.
So far, GBP/USD managed to remain above the key 1.3050/00 support, and has potential for some recovery. Resistance is at 1.3300, 1.3500 and 1.3640 (38.2% Fibonacci) of the post-Brexit decline. Support is at 1.3085, 1.3000 and 1.2950.