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GBP/USD: Could BoE trigger break of 1.4 handle?

Fawad Razaqzada Fawad Razaqzada 06/05/2021
GBP/USD: Could BoE trigger break of 1.4 handle? GBP/USD: Could BoE trigger break of 1.4 handle?
GBP/USD: Could BoE trigger break of 1.4 handle? Fawad Razaqzada
The focus is turning to the Bank of England with the central bank meeting due at 12:00 BST. Investors will be wondering whether Andrew Bailey and his MPC colleagues will start turning more hawkish amid improvement in data and ongoing optimism over the re-opening of the economy.

Sentiment towards UK assets have improved markedly since the end of last year, when a hard Brexit was avoided and after the UK’s decisive action to put the nation into another lockdown caused virus infections and covid-related deaths to fall sharply. The nation has since removed various lockdown measures, while racing ahead in the Covid vaccinations. Investors are hopeful that things will be closer to normal in the UK sooner than many other nations, which should help fuel a strong economic recovery in the months.

Data has also been improving in the UK, which together with rising global inflationary pressures have raised speculation that the Bank of England will need to start thinking about tapering bond purchases and raising interest rates in the not-too-distant future. Last week for example we saw flash manufacturing and services PMIs both climbed above 60.0; retail sales have jumped 5.4% in March and house prices have gone through the roof ahead of the stamp duty holiday expiry at the end of June. House prices rose +2.1% month-over-month according to Nationwide. This is yet another sign of rising inflationary pressures in the economy.

Although CPI and wage inflation in the UK have remained relatively soft, input costs are nonetheless rising as the increases in prices of raw materials are exacerbated by the recent strength in the pound.

The trouble for the cable is that the US economy is improving even more strongly than the UK, and the dollar has found pockets of strength here and there as a result. This has prevented the cable from rising more rapidly. Also hurting the pound has been some mild concerns about another Scottish independence referendum, although it is highly unlikely that the UK government will allow it.   

All told, there is less need for emergency stimulus measures from the Bank of England and if the central bank does turn hawkish then the GBP/USD may finally break that key 1.40 hurdle where it has repeatedly found resistance.

GBP/USDSource: ThinkMarkets and TradingView.com
 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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