GBP/USD WEEKLY FORECAST: BEARISH
- The British Pound[1] posts heavy losses against the U.S. dollar[2] during the week, falling to its weakest level since September 2020
- Cooling economic activity in the United Kingdom and soaring yields in the US are likely to weigh on GBP/USD[3] in the near term
- Technical signals are also bearish for Cable
Most read: US Dollar Quickly Claws Back to the Highs - Threatens Topside Break[4]
The British Pound was on track to finish the week sharply lower against the U.S. dollar on Friday, pressured by weak UK economic data, soaring U.S. bond yields and some risk-off sentiment. During New York afternoon market hours, GBP/USD[5] was down 1.44% to 1.2840 on the day and off 1.68% over the past five sessions, trading at lows not seen since September 2020.
Various UK reports on Friday morning, including retail sales, manufacturing output and services sector activity for March, surprised on the downside, a sign that the recovery is faltering and that the economy is starting the second quarter on a weaker footing as surging price pressures curtail demand.
With growth slowing rapidly, the Bank of England (BoE) may not be as aggressive as other central banks in its fight against inflation. This means that we may only see moderate interest rate increases in the coming months, rather than front-loaded hikes such as those entertained by the Federal Reserve, which is now seen raising borrowing costs by 50 bps at its meetings in May, June and possibly July.
Hawkish repricing of Fed policy has pushed the U.S. 2-year yield up 128 bps to 2.72% since March. The 2-year gilt has also drifted upwards, climbing 66 bps to 1.70% over the same period,
