Technical Bias: Bearish
The GBPUSD fell to nearly five-year lows on Friday, extending a two-week reversal that shaved off more than 800 pips. While the market is oversold, the GBPUSD continues to face downward risk after falling below a key support level on Friday.
The GBPUSD bottomed out at 1.4710 on Friday before closing at 1.4744, its lowest level since June 2010.
Below is a rundown of this week’s key market movers.
The US government will report on February industrial production and capacity utilization. Industrial production is forecast to rise 0.3 percent in February, following a 0.2 percent advance in January.
Separately, the National Association of Home Builders (NAHB) will release the housing market index, a key gauge of homebuilder confidence. The index is forecast to rise to 56 in March from 55 in February.
The Commerce Department will report on housing starts and building permits for February. Housing activity may have cooled down in February as record-low temperatures swept through some parts of the United States.
The minutes of the Bank of England’s March policy meetings will be released and are expected to show a 9-0 vote in favour of keeping interest rates at 0.5 percent. That would mark the third consecutive meeting policymakers voted unanimously in favour of the status quo. Monetary Policy Committee members Martin Weale and Ian McCafferty had voted in favour of raising interest rates at five successive rate meetings.
In economic data, the Office for National Statistics will release official UK employment figures, including the claimant count change, ILO unemployment rate and average earnings.
The United States Federal Open Market Committee (FOMC) will issue a key rate statement on Wednesday, which could confirm that policymakers are open to adjusting interest rates sooner rather than later. Several market analysts expect the Fed to drop the word “patient” from its official rate statement, signaling that a midyear rate hike is still on the table. This March rate statement will also be accompanied by a summary of economic projections covering GDP, unemployment, inflation and interest rates.
The ONS will report on UK public sector net borrowing for February, which captures changes in the amount of new debt held by the government. UK public sector borrowing fell more than expected in the third quarter, official data showed.
The GBPUSD is expected to consolidate this week, barring an overly hawkish Federal Reserve. The longer-term outlook on cable is slightly bullish, as the pair is expected to gather strength north of 1.50 in the next 1-3 months.