GBPUSD darts higher as BOE warns of a 30% hit to GDP; rates left intact
The GBPUSD pair rose slightly after the Bank of England (BOE) delivered its interest rate decision. With the benign rate decision now behind us, focus will shift to the US jobs numbers, which will be released later today and tomorrow.
BOE normal interest rate decision
The BOE interest rate decision can be summed up in one name; normal. As we had predicted yesterday, the bank left interest rates unchanged at 0.25% and committed to support the economy.
Also, the bank voted to continue with the 200-billion-pound quantitative easing program that started in March. Some analysts were expecting the bank to increase the purchases or even remove the cap. However, with the bank buying assets worth about 18 billion pounds per month, there was no need to do this.
The bank expects consumer consumption to fall by more than 30%, corporate revenue to drop by about 40% and the rate of inflation to remain below the target of 2.0%. Andrew Bailey also lamented about the unprecedented situation the country is going in.
Recent data from the UK has been relatively disappointing. The services PMI has tanked, the unemployment rate has risen, and more companies are expected to file for bankruptcy.
GBP/USD focus shifts to the US
With the BOE rate decision done with, the next focus will be in the United States, where we will receive the employment data today and tomorrow. Analysts expect that an additional 3 million Americans filed for jobless claims in the previous week. This will bring the total number of those who have filed for claims to more than 33 million.
This data will come after data from ADP showed that private payrolls dropped by more than 20 million in April. Tomorrow, we will receive the official jobs data from the US. Analysts expect the unemployment rate to jump to 15% as more than 20 million people lose their jobs.
On the daily chart, we see that the GBPUSD pair found a strong resistance at 1.2648, where it formed a double top pattern. The pair also below the 100-day and 50-day EMA and is now slightly above the 38.2% Fibonacci retracement level of 1.2225. Also, the pair has found support on the blue trend line. Therefore, I expect a new bearish trend to resume if the pair manages to move below this trend line and below the 38.2% retracement level.
On the other hand, a move above 1.2465 will invalidate this trend. This price is along the 50% retracement and 50% EMA level.