GBP/USD Forecast May 24-28 – Inflation And Jobs Data Improve

GBP/USD posted a winning week for a third straight time. It’s a light calendar this week, with two releases. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, employment data improved. The number of unemployed persons fell by 15.1 thousand, compared to an expected rise of 25.6 thousand. Unemployment fell for a third straight month, dropping from 4.9% to 4.8%. Wage growth remained strong at 4.0%, but this was lower than the forecast of 4.5%.

Inflation was higher in April, as the reopening of the economy has led to increased economic activity. Headline inflation climbed to 1.5% in April, up sharply from 0.7% beforehand. Core CPI rose to 1.3%, up from 1.1%.

In the US, the Philly Fed Manufacturing Index slowed to 31.5, down sharply from 50.2 and shy of the forecast of 40.8. Unemployment claims fell for a third straight week, coming in at 444 thousand versus 478 thousand a week earlier. 

The Manufacturing PMI was up slightly to 61.5, above the forecast of 60.0. The Services PMI sparkled with a read of 70.1, as the business sector showed unprecedented growth. This beat the estimate of 64.3. The 50-level separates expansion from contraction.

GBP/USD daily chart with support and resistance lines on it. Click to enlarge:

1. Public Sector Net Borrowing: Tuesday, 6:00. The budget deficit has been steadily growing, as the government spends more money to support the post-COVID-19 recovery. The deficit rose to GBP 27.2 billion in March, but is expected to narrow to GBP 13.5 billion in April.
2. CBI Realized Sales: Tuesday, 10:00. After a string of six successive declines, sales volume increased in April with a solid gain of 20. The upswing is forecast to continue, with a consensus of 28 for May.

GBP/USD Technical Analysis

Technical lines from top to bottom:

• 1.4357 has provided resistance since April 2018.
• 1.4269 (mentioned last week) is next.
• 1.4180 was tested during the week.
• 1.4070 is the first support level.
• 1.3909 is next.
• 1.3826 is the final support level for now.

I Remain Bullish on GDP/USD

The pound touched multi-month highs this week, and the UK recovery continues to gather steam as the reopening continues. This bodes well for the British pound.