GBP/USD Outlook: Implications of the UK GDP Data

Summary:

GBP/USD is trading lower ahead of the UK GDP preliminary data for Q1'21. The pair will also be reacting to BoE Governor's speech and US inflation data.

GBP/USD is trading lower at the beginning of an event-filled session. To begin with, the currency pair will have its movements impacted by the UK GDP preliminary data for Q1’21. Analysts expect a reading of -1.6%. In Q1’20, Britain’s economic growth rate dropped by -2.2% amid Brexit talks and the coronavirus pandemic. In comparison, the economy grew by 1.3% in the past quarter.

GBP/USD will also be reacting to the BoE Governor’s speech later in the day. Investors will be keen on Governor Bailey’s tone and remarks on the tightening of the monetary policy and overall economic outlook. Last week, the UK central bank left interest rates unchanged. However, it lowered its weekly bond purchases from £4.4 billon to £3.4 billion.

On the part of the US dollar, the focus is on the consumer price index (CPI) data. The forecasted core CPI of 0.3% MoM is similar to that of the previous month. Notably, the reading in March was the highest since August 2020.

GBP/USD Technical Outlook

GBP/USD has erased some of its previous gains ahead of the US inflation data. At the time of writing, it was down by 0.19% at 1.4115. In the previous session, it had hit an intraday high of 1.4168. That level is its highest since 25^th February. The formation of a bullish flag points to potential gains in the near term. Besides, on a three-hour chart, the currency pair is trading above the 25 and 50-day exponential moving averages.

I expect GBP/USD to find support at 1.4100 as the bulls target the upper levels of 1.4200 and 1.4244; its highest levels since February. On the flip side, better-than-expected US CPI numbers could push the pair to 1.4000.