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Another week of rather volatile conditions persisted for GBP/USD currency pair speculators last week, as the Bank of England and growth data from the UK created impetus.

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The GBP/USD currency cross went into this weekend near the 1.25210 ratio. This result may look like a negative technical sentiment when a one-week perspective is used, but the ability of the GBP/USD pair to climb back from lows around the 1.24460 ratio seen on Thursday may spur speculators. While the GBP/USD pair did finish the week lower than it started, speculators are likely intrigued about the notion of additional upside potential.

But before speculators gamble blindly on upside, they should also remember the rather choppy Forex landscape which has proven difficult for GBP/USD day traders as well all others wagering on major currencies versus the US dollar since the start of this year. Last Thursday’s Bank of England Monetary Policy Summary helped pushed the GBP/USD pair lower until financial institutions apparently thought it had been oversold.

Lower Depths and a Climb Upwards in the GBP/USD

Last Thursday’s lows challenged values previously seen on April 24, as downwards momentum has been strong in the GBP/USD pair. A look at the one-month chart shows how the GBP/USD cross has been struggling to maintain its balance above the 1.25000 mark.

Yes, the 1.26000 mark may be the preferred value for bullish GBP/USD traders to target, but the simple ability of staying above the 1.25000 level over the past month has not been easy. However, early last week did see the pair remain above the 1.25000 mark until Wednesday.

It is likely that financial institutions were positioning for inaction from the Bank of England, which certainly was delivered on Thursday. The BoE spoke about the need to potentially lower its Official Bank Rate in the coming months. This is something the BoE likely doesn’t want to do before the Federal Reserve lowers their Federal Funds Rate.

Inflation concerns for now have allowed the Bank of England to stay inactive. Financial institutions are suspicious about global central banks, and this has led to widespread volatility across Forex. Yet, last Friday also saw a push higher in the GBP/USD pair, and this occurred when GDP numbers from the UK came in stronger than expected.

Rush Higher and Confusion Regarding Where to Go Next

While the growth numbers from the UK came in with a gain that was not anticipated and helped the GBP/USD currency pair surge to a high of around 1.25400 momentarily, the currency cross was not able to hold onto high water marks which were still below values seen last Monday and Tuesday. The GBP/USD pair went into this weekend while producing a slight selloff.

• The slight late selling in the GBP/USD pair last Friday occurred after an inflation report from the US once again came in stronger than expected. This is an important warning sign.
• The broad Forex market remains nervous regarding US data outlooks, and while they might be leaning towards a weaker US dollar outlook mid-term, short-term conditions remain volatile. Day traders need to remain cautious because of incoming data this week.

GBP/USD Weekly Outlook: Speculative Price Range is 1.24625 to 1.26150

The UK will be rather light on economic data this week. However the US will present important Producer Price Index statistics on Tuesday, and CPI numbers will be delivered on Wednesday. GBP/USD traders need to be prepared for more price velocity.

Monday’s opening should be watched intently to judge existing behavioral sentiment when the London Forex session opens fully. If the GBP/USD currency pair can maintain its marks above the 1.25200 level, this may be seen as a sign of optimism -- but any falls below the 1.25200 level and any challenge of the 1.25175 mark will highlight nervousness.

Traders should watch technical charts carefully on Monday and Tuesday, and also make sure they are not overly leveraged as inflation data starts to come from the US on Tuesday. Weaker inflation data from the US would help GBP/USD bullish perspectives, but betting on the outcome of the PPI and CPI readings beforehand will be gambling, particularly when taking into consideration the surprising outcomes which have been coming from the US on a consistent basis the past few months. If the inflation numbers are weaker from the US, this could spark a surge of GBP/USD buying.

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