Monfor Weekly Update

Monfor Weekly Update

The week kicked off with Europe and many other parts of the globe still relishing their extended Easter holiday.  Despite the lack of economic data releases outside of the US, there was no shortage of market activity.  The unexpected uptick with the US ISM manufacturing PMI data injected some volatility into currency markets.

With the robust US data setting the tone early in the week, GBP was weaker against the USD, breaching several key support levels.  This downward shift suggests the potential for further decline in GBP/USD in the short term.  Having dropped nearly 3% from its 7-month peak in early March, the currency pair is nearing its 2024 lows around $1.25, dashing hopes for trading near $1.30 this spring.

Historically, April is a strong month for GBP against the USD. However, the opening day of the month saw GBP/USD slide approximately 0.7%.  While past instances of GBP closing below this crucial level have seen recoveries leading to a gradual return toward the upper half of its year-to-date range, this time is different.  The breach of its 50-week moving average, a support level in place since mid-November, adds to the bearish sentiment.  These technical signals, coupled with bullish speculator sentiment towards GBP, paint a gloomy picture for GBP.

On the fundamental front, declining UK inflation has shifted rate expectations earlier, aligning with those of the Fed and ECB in June. There's even a small but noticeable speculation that the BoE could be the first of the three to cut rates in May.

With no significant economic releases expected from the UK this week aside from final PMI numbers, GBP/USD will be heavily influenced by US data. Yesterday's positive US ISM report drove US yields to 3-month highs and bolstered the USD.  Should this week see a strong round of US jobs data, the decline in cable could accelerate, with the major support level at 1.25 likely to face a test.

Please note:  The news and information contained on this site should not be interpreted as advice or as a solicitation to offer to convert any currency or as a recommendation to trade.

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