After March weaker than expected GDP (0.1% q/q vs 0.3% q/q) data, pound traders are particularly focusing on April PMI survey. Post the GDP data the GBP was beaten down hard and on the other side expectations for a May, hike pushed lower.

“Weaker-than-expected GDP print we have changed our forecast for the Bank of England (BoE) and have shifted out by a quarter (i.e. to August) the next 25bp rate hike from the MPC” according to Nomura Research Analysts.

“The likelihood of a hike in May was just 20%, down from about 50% yesterday and 90% a week ago”, reported by Barclays. In an Economic Research note, Barclays reported, “We maintain our expectations of a rate hike in May on the grounds that the MPC will have sufficient reasons to believe that Q1 soft data are temporary and that the underlying trend, in their view, is still somewhat slightly above potential”.

Data review:

UK gross domestic product was estimated to have increased by 0.1% in Quarter 1 (Jan to Mar) 2018, compared with 0.4% in Quarter 4 (Oct to Dec) 2017

Data preview:

Manufacturing, Construction and Services PMI

“Any further weakening of the UK numbers, or even a lack of rebound from March, will seriously dampen the likelihood of the Bank of England hiking rates in May” IHS Markit reported.


The euro cross pulled back to the sub-0.88 levels after rejected at the 61.8% fib reaction. The support level in focus is at 0.8720 and 0.8680 with resistance seems to be at 0.8850 and 0.8880.  Turning to the daily studies, RSI is still below previous high but the oscillator has been remaining bullish.

In our base case, the euro major should face resistance between 0.8860-0.8950.  Our weekly model suggests that selling on rallies favors the medium trend. Fundamentally, we still see a strong case for GBP should strengthen against the euro over the coming days.

View: Minor consolidation

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