British currency survived an extremely volatile week. At first, GBP/USD fell to 1.4050 on the renewed Brexit concerns and bleak assessment of the outlook for the UK economy from the Office for Budget Responsibility. Then, however, the pair flew up to 1.4500 on the meetings of the US Federal Reserve and the Bank of England.
British central bank decided to leave rates unchanged at 0.5% this week. All MPC members voted to keep rates steady at record lows. The Bank of England wasn’t actually hawkish and its comments didn’t suggest an interest rate hike soon. Yet, the broad weakness of the US dollar did the trick and made GBP/USD soar. In addition, the bulls benefited from the relief that the Bank of England doesn’t plan to cut rates – this should help the pound against the euro.
Next week don’t miss UK inflation and public sector net borrowing figures on Tuesday and retail sales on Thursday. All in all, the latest data from the UK were disappointing. Even the increase in wages is considered to be too low, so the pound needs some good readings to retain strength.
Technically above 1.4350 GBP/USD has good chances to rise to 1.4570 and 1.4660 still playing on the weaker dollar. Decline below 1.4350 should, on the other hand, open the way down to 1.4150. Remember that UK economic weakness and the possibility of Britain leaving the European Union makes the picture unstable and can cause more swings in the pound.