Last week, the GBPUSD continued its recent decline. The announcement that UK Mortgage Approvals increased more than forecast, in addition with UK house prices rising by around an annualised 10% encouraged further downside movement in the Cable.
However, downward movement in the GBPUSD accelerated on Friday, following the UK’s latest Manufacturing PMIs unexpectedly declining to its lowest level since July 2013. The UK fundamentals have consistently performed impressively over the past year and such strong performances have contributed towards the GBP gaining around 15% against the USD over the past twelve months. Friday’s unexpected manufacturing decline could be an indication of the UK fundamentals slowing slightly, and opens up the question regarding whether there could be more than meets the eye, in regards to the recent GBPUSD decline.
The upcoming week is high in quantity with UK economic releases. On Monday, the latest Markit Construction PMI is announced. This is followed by UK Services PMI on Tuesday, with Industrial and Manufacturing production on Wednesday. On Thursday, the latest BoE Interest Rate Decision is announced.
Recently, investors have shown some impatience with the contradictory messages sent from the BoE regarding the timing of a UK interest rate hike. If any of the UK’s economic releases before the rate decision suggest that the BoE will delay an interest rate hike, downside movement in the GBPUSD will likely accelerate.
The technicals on the Daily timeframe have changed substantially over the past week. Firstly, there has been a conclusion to a bullish trendline that has controlled the GBPUSD’s direction since November 2013. The pair now seems to be find itself being traded in a recently formed downward channel. Any upside movement in the GBPUSD will find resistance located at 1.6891 and 1.6948. If the downward pressure in the GBPUSD continues, support can be found at 1.6771 and 1.6730.