GBP/USD Forecast March 15-19 – BoE Rate Decision In The Spotlight

GBP/USD reversed directions last week and pushed back into 1.39 territory. The upcoming week has three releases, highlighted by the BoE rate decision. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, The monthly GDP report showed that the economy contracted by 2.9% in January. This was considerably better than the street consensus of -4.9%, but indicated downturn in growth after a gain of 1.2% in December. The economy is reporting negative growth for the second time in three months, raising concerns about the health of the economy.

The UK manufacturing sector has been solid, but Manufacturing Production started the year on a sour note with a reading of -2.3%. This marked the first decline after nine straight months of growth. On a year-by-year basis, the indicator contracted by 5.0%.

In the US, inflation ticked higher in February, much to the relief of the market, which has been concerned that pent-up demand could lead to runaway inflation. Core CPI edged up to 0.1%, up from 0.0%. Headline CPI ticked up to 0.4%, up from 0.3%. The week ended on a positive note, as UoM Consumer Sentiment for March rose from 76.2 to 83.0. It is at its highest level in 12 months.

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

  1. CB Leading Index: Monday, 14:30. The index is based on seven economic indicators. In December, the index showed a small decline of 0.5%. Will we see an improvement in the January release?
  2. BoE Rate Decision: Thursday, 12:00.The BoE is widely expected to maintain the Official Cash Rate at 0.10% and asset purchases at GBP 895 billion. With the UK going through its worst economic crisis in three centuries, investors will be looking for signals from the bank as to whether it plans to add stimulus in order to boost the economy.
  3. GfK Consumer Confidence: Friday, 00:01. The British consumer remains pessimistic about economic conditions, with the index showing readings well below zero. Still, the index improved to -23 in February, its best reading in 11 months. The forecast for March stands at -20.
  4. Public Sector Net Borrowing: Friday, 7:00. The deficit was sharply lower in January, falling from GBP 33.4 billion to GBP 8.0 billion. However, the deficit is expected to climb to GBP 20.0 billion in February.
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