The escalation of the war in Ukraine and, the prospect of a slowdown in China’s growth following the renewed COVID-19 lockdowns have created a significant disadvantage in risk appetite. Future global growth indicators indicate further decline and geopolitical challenges show no signs of decline. GBPUSD managed to limit last week’s losses, having closed the market with an increase of +0.98% on Friday. However, throughout April, the Pound struggled to move higher, with its largest weekly and monthly declines since June 2021. The strengthening US dollar and international factors are the main drivers of the recent fall in the GBPUSD exchange rate, with the pair testing a new 21-month low at 1.2410 last week, below the key psychological 125.00 level.
Retail sales fell -1.4% last month, while the February drop was revised to -0.4% at the first official indication that rising energy and food costs are offsetting costs that should flow to other parts of the economy. In addition, an IHS Markit Flash PMI survey in April showed that activity in the UK boarding service sector declined sharply.
The BOE is expected to continue its trend of interest rate hikes in each session with another 25 basis points increase later this week. At the last meeting, the hawkish rhetoric seemed to be cooling off, but as inflation continues to warm, the market expects six interest rate hikes this year, with two already applied. The monetary policy report will accompany the decision with new forecasts and a press conference, lead by Governor Bailey.
Technical Overview
The rise from 1.1408 was completed at 1.4247 and the current dynamic, may be the beginning of a longer-term downtrend. The price of the asset is now stuck at the revaluation level of 61.8% around 1.2500. As long as the resistance 1.3160 is maintained, deeper falls will test 1.2250 and 1.2072.
The overnight bias earlier this week was neutral and likely to consolidate. The uptrend will test 1.2750 and will remain limited below the round number of 1.3000. On the downside, a break of 1.2410 will first target support at 1.2250. In general, the medium-term downtrend is not over yet, although the downtrend has stopped after some gains over the weekend; as shown by the oscillation histogram which is lower in the middle line, the asset price remains below Kumo and EMA200.
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Ady Phangestu
Market Analyst
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