Forex Market: GBP/USD poised for worst weekly performance in a month as weaker data adds to prospects of more BoE action on rates front

GBP/USD remained mostly stable in late European trade on Friday, but was set to register its sharpest weekly loss in one month, as uncertain macroeconomic outlook, arduous Brexit negotiations as well as Britain’s highest COVID-19 death toll in Europe have all mounted pressure on the Pound.

As the UK economy rebounded at a considerably slower rate than expected in May, hesitation emerged among market players if the recently announced fiscal stimulus measures will suffice to support the labor market and overall activity.

“The pound has had a slightly more negative week over concern that weaker data will prompt further action on the rates front from the Bank of England at its September meeting,” Michael Hewson, chief market analyst at CMC Markets UK, wrote in an investor note.

Meanwhile, the latest government figures showed that the coronavirus pandemic had already claimed the lives of more than 45,100 people in the United Kingdom, while total confirmed cases had exceeded 292,500.

With macro data flow thinning during the next week, developments surrounding Brexit talks are expected to return to the fore as a major driver of the Pound’s valuation.

As of 11:27 GMT on Friday GBP/USD was inching down 0.02% to trade at 1.2552, while moving within a daily range of 1.2538-1.2571. The major pair has retreated 0.60% so far this week, while being on track to register its worst performance since the business week ending on June 19th.

In terms of economic calendar, today market players will be paying attention to US housing data due out at 12:30 GMT. The number of housing starts in the country probably rose to 1.169 million units in June, according to market expectations, from the seasonally adjusted annual rate of 0.974 million in May.

Meanwhile, the number of building permits probably increased to 1.290 million in June from an annual level of 1.216 million in May.

Additionally, the monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States continued to improve in July. The preliminary consumer sentiment index probably rose to 79.0 in July from a final 78.1 in June. Last month, the sub-index of current economic conditions was revised down to 87.1 from a preliminary 87.8, while the sub-index of consumer expectations was revised down to 72.3 from a preliminary 73.1. The preliminary report will be released at 14:00 GMT.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 24.1 basis points (0.241%) as of 10:15 GMT on Friday, down from 25.3 basis points on July 16th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.2566
R1 – 1.2613
R2 – 1.2671
R3 – 1.2718
R4 – 1.2764

S1 – 1.2508
S2 – 1.2461
S3 – 1.2403
S4 – 1.2344

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