GBPUSD Under Pressure As BOE Plans to Fund Government Spending

GBPUSD
GBPUSD

The GBPUSD pair was little changed as investors waited for the jobless claims data from the United States. These numbers are expected to show that more than 5 million Americans filed for jobless claims in the previous week. This will bring the total number of claims filed in the past three weeks to more than 15 million.

The market also ignored negative numbers released by the Office of National Statistics. The numbers showed that industrial and manufacturing activity slowed down in February before the current financial crisis. The industrial production rose by 0.1% from January. It dropped by 2.8% on an annualized basis. The construction output dropped by 1.7% in February while the manufacturing production dropped by 3.9%. In the same month, the trade deficit widened to more than 11.5 billion pounds.

Part of the reason why these numbers failed to move the pair is that the situation has changed significantly since February. Companies have shut as more people stay home because of the coronavirus pandemic. Therefore, investors expect the data for March and April to be significantly weaker. In fact, recent data has suggested that the economy could go through a recession this year.

Another big news was that BOE announced that it would help fund extra government spending. This means that the government will expand the “ways and means facility” which currently stands at 400 million pounds. The bank did this during the last financial crisis when it expanded the facility to more than 20 billion pounds.

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GBPUSD Technical Analysis

The GBP/USD pair has been consolidating since March 27. On the four-hour chart, the pair has remained between the support and resistance levels of 1.2165 and 1.2485 (50% Fibonacci Retracement). The pair has also formed an ascending triangle pattern and is trading slightly above the upper limit of the Ichimoku cloud. I expect the pair to be bullish if it moves above the 1.2485 resistance level.

On the flipside, the pair could also hit the resistance of 1.2485 and then start moving downwards.

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