British Pound (GBP) Outlook – Positve Sentiment Pushing GBP/USD Higher

British Pound (GBP) Price Outlook

• BoE dep gov Broadbent sees ‘very rapid growth over the next couple of quarters’.
• UK vaccination program ploughing ahead.

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The deputy governor of the Bank of England, Bill Broadbent, said over the weekend that the UK economy may register ‘very rapid growth over the next couple of quarters’ fueled by a further rise in consumer spending. Broadbent suggests that consumers will save less and continue to spend their recently accumulated savings above the BoE official forecast of 5%, boosting the nascent UK recovery.

The latest EY ITEM Club report now forecasts that the UK economy will grow by 6.8% in 2021 – the fastest rate since the second world war – compared to the 5% growth suggested in their January forecast, citing the highly successful UK vaccination program as the fundamental driver of economic confidence. The report also forecasts that UK unemployment will not be as bad as initially feared – 5.8% compared to its 7% forecast in January – with the jobless rate falling to 4.5% by the end of next year.

The UK vaccination program has seen more than 46 million people receive at least one vaccine shot – nearly 65% of the UK population – while 12.5 million people have received two doses. The latest data also show deaths within 28 days of a positive test and patients admitted to hospital numbers continuing to fall.

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The daily chart shows that the medium-term supportive GBP/USD trendline remains in place despite the recent bouts of GBP/USD weakness. While this week’s UK economic calendar is fairly light, the US docket is packed full of potentially market-moving events and releases, and these are the most likely drivers of cable this week, starting with Durable Goods at 12:30 GMT today.

For all market-moving economic data and events see the real-time DailyFX calendar.

GBP/USD may test the recent cluster of highs just above 1.4000 if the current positive set-up remains while there is a cluster of support between 1.3800 and 1.3850.

GBP/USD Daily Price Chart (October 2020 – April 26, 2021)

Retail trader data show 53.64% of traders are net-long with the ratio of traders long to short at 1.16 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

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What is your view on GBP/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.