Sterling Talking Points:
- Recent data prints point to higher Q2 UK GDP.
- Next week’s calendar is light.
The DailyFX Q2 GBP Forecast[1] is available to download.
Fundamental Forecast for GBP: Bullish
The sell-off in Sterling pairs over the last 4-6 weeks is seemingly coming to an end with recent data and surveys pointing to potentially stronger growth in the second-quarter of the year after a tepid first-quarter. This week’s EC Economic Sentiment survey for the UK rose to 1074 in May form 105.5 in April with the consumer confidence indicator rising to a nine-month high of -3.0 against a prior month’s reading of -5.9. In addition, today’s Markit UK Manufacturing PMI rose to 54.4, exceeding expectations of 53.5 and last month’s reading of 53.9. While these two indicators do not on their own point to stronger growth, combined with slightly better-than-expected retail sales numbers and a robust jobs market, the weather-related weakness in Q1 should be a thing of the past.
While we have changed our outlook to bullish from neutral, traders will need to look at a variety of Sterling pairs to try and find the right trade for them. The US dollar remains strong and was given another uplift Friday on better-than-expected jobs and wages data, while the Canadian dollar[2] recently got an uplift from mildly-hawkish BoC rhetoric at this week’s central bank rate decision before falling back on disappointing Q1 GDP numbers. Other pairs that traders should study include GBPJPY[3] and GBPNZD[4].
We are still running a short EURGBP position from 0.88315[5] – opened on May 10 –
