The GBP/USD exchange rate fell below 1.33 after the University of Michigan released its Consumer Sentiment index, which dropped to 50.8, the lowest since July 2022. Additionally, inflation expectations for the next year rose from 6.5% to 7.3%, and expectations for the next five years increased from 4.4% to 4.6%. This decline in consumer sentiment impacted US housing data. While housing starts rose in April, Building Permits fell to their lowest level in nearly two years. The British Pound ended the week slightly down by over 0.24%.

US Import Prices Increase

In the US, import prices unexpectedly climbed in April due to higher costs for capital goods and a weaker US Dollar. The Federal Reserve Chair warned against quickly easing monetary policy, stating some elements of their strategy remain unchanged. Next week, UK traders will focus on inflation figures, flash PMIs, and Retail Sales data. In the US, Fed speakers, flash PMIs, and housing data will be released. The technical outlook for GBP/USD suggests that closing below 1.33 may lead to testing further support levels. Conversely, a close above 1.33 could create chances to reach higher resistance levels. Recent sessions have strongly indicated increasing pressure on the GBP/USD pair. The drop below 1.33 coincided with falling consumer sentiment in the US. The University of Michigan’s figure of 50.8 suggests that American confidence is decreasing, reaching levels not seen since mid-2022. Inflation expectations for the upcoming year have also risen significantly, moving from 6.5% to 7.3% in just one month. This suggests that households are preparing for higher short-term prices while longer-term expectations have also slightly increased. These shifts make it challenging to justify predictions of an easing in monetary policy. This rise in inflation expectations has also affected housing data. Although housing starts increased, there was a notable decline in permits, reaching nearly a two-year low. This indicates that developers might be pulling back due to expectations of reduced demand or tighter financing conditions, creating a mixed signal in an otherwise unified sector.

Technical Overview of GBP/USD

Meanwhile, US import prices unexpectedly rose in April, influenced by higher costs for capital goods and the weaker dollar. This change was not mere statistical noise. It coincided with firm comments from Powell, who did not suggest that rate cuts would begin soon. The indication that the current strategy remains unchanged means the threshold for any adjustments is still high. Next week, we’ll closely monitor data from both the UK and the US. In the UK, inflation metrics will be key. If consumer prices are stronger than expected, it might reignite expectations for tighter conditions. Additionally, flash PMIs and Retail Sales data will help gauge economic momentum. The combined results from services and manufacturing will show whether output is stable despite high-interest rates. In the US, the impact may come more from Fed speakers than from data. A lineup of Fed officials is set to speak, and any change in tone from Powell’s stance could influence market expectations, especially given rising inflation concerns. The market’s reactions to these comments should not be overlooked. Technically speaking, if GBP/USD falls below 1.33, it increases the risk of further declines. This level has served as a support floor recently, and failing to regain it could lead to testing nearby support levels, potentially around 1.3150. Buying momentum may take time to return unless bulls can secure a daily close above 1.33, aiming for around 1.3420. Moving forward, market direction will be shaped not only by macroeconomic data but also by the subtleties in central bank communications. For those with exposure to this market, it’s no longer just about the overall figures. Create your live VT Markets account and start trading now.

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