After starting the week with strong gains, the British pound has settled down. In the North American session, GDP/USD is trading at 1.3900, up 0.09% on the day.
The British economy continues to perform well, as the recovery is gaining traction. On Tuesday, Manufacturing PMI in April came in at 60.9, revised upwards from 60.7 points. A reading above the 50-level indicates growth, so manufacturing is well into expansionary territory. We’ll get a look at Services PMI on Wednesday (8:30 GMT) which showed growth in March for the first time in four months, with a reading of 56.3. The upswing is expected to continue in April, with a consensus of 60.2 points.
The UK consumer is also showing optimism about economic conditions, as net mortgage borrowing was 11.8 billion pounds in March, its highest level since the series began in April 1993.
Will BoE hint at a taper?
With the economic recovery fully underway, the Bank of England, like other major central banks, is under some pressure to taper its QE programme in order to ensure that the economy does not overheat. The Bank of Canada tapered its asset purchases last month, and on Friday, a member of the Federal Reserve publicly called on the Fed to start having a conversation about tapering.
The MPC is split on whether to taper at the upcoming meeting or wait until the summer. There are strong reasons to wait before reducing QE, given that UK GDP contracted in the first quarter and employment numbers have not recovered to pre-pandemic levels. If the central bank does press the taper trigger at the upcoming meeting, it could well have a dramatic effect and boost the pound towards the 1.40 level.
GBP/USD Technical Analysis
- There is immediate resistance at 1.3927, followed by resistance at 1.4039
- There is support at 1.3753. Below, there is support at 1.3691
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