GBPUSD Hits Daily Lows Ahead Of The Bank of England Policy Decision
GBPUSD breaks lower at two-week lows in the afternoon as the selling pressure accelerates after the pair breached below the 50-day moving average. Investors ignored weak data from the USA. ADP reported that private-sector companies lost 20.2 million jobs in April as most of the companies forced to close amid the coronavirus outbreak.
UK Construction Activity At Record Lows
Earlier today the construction activity in the UK dropped to record lows as construction works freeze amid the coronavirus outbreak. The UK April construction PMI came down to 8.2 well below the expectations of 21.7, the March reading was at 39.3, while the February reading was at 52.6 as the economy was still open.
Tim Moore, economics director at Markit, commented: “Widespread site closures and business shutdowns across the supply chain meant that vast swaths of the construction sector halted all activity in response to the Covid-19 pandemic,” he said.
Bank of England Preview
Tomorrow the Bank of England policy meeting will be virtual, and the decision will be released at 7 AM London time. Analysts expect the BOE will keep interest rates unchanged. The focus will be on the projections and outlook on inflation and GDP growth in the upcoming months.
Some analysts expect that the BOE might increase the QE or give a tip for an increase in the June policy meeting. Bank of England announced £200bn of bond purchases in March, in an attempt to calm the markets and ensure that the UK government can fund its relief package.
The central bank cut interest rates to 0.10% and expanded the QE program by £200 billion in the last meeting. Now the QE program is up to £645 billion, available to government in the fight against the impact of the coronavirus crisis.
GBPUSD is 0.57% lower at 1.2362, at two-week lows as the bears are taking control of the pair. The move today cancels the recent positive momentum which formed after the March lows amid the coronavirus sell-off. The technical outlook is bearish now, and only a return above the 50-day moving average can cancel the bearish momentum.
On the downside, first support stands at 1.2335 the daily low. In case of a move below the daily low, the GBPUSD price could correct towards 1.2303 the 50% Fibonacci retracement. If the GBPUSD pair continues lower, the next support area would be met at 1.2166 the low from April 7th.
On the contrary, the first resistance for the pair stands at 1.2450 the daily high. The next hurdle for GBPUSD would be met at 1.2590 the high from May 1. A successful break above 1.2590 would likely to open the way for a bigger rally to the next resistance at 1.2648 the 200-day moving average.