UK Current account/ GDP Preview: What to expect of GBP/USD?

The GBP/USD pair continues its struggle to take the recovery once again above 1.34 handle, as the greenback remains in demand across the board in wake of recent upbeat US economic releases.

More so, the pound remains undermined on the back of mounting economic and political uncertainties spurred by the Brexit vote, with markets now awaiting the political leadership declarations (Johnson and May) from the Conservatives party as they head towards today’s deadline.

While BOE Governor Mark Carney’s speech is also on the radar, as he is expected to provide hints on how Britain's economy is coping after last week's vote to leave the EU. Carney’s speech is scheduled at 1500GMT.

Apart from these key events, we also have a data-heavy GBP calendar, with the current account and GDP data due on the cards, and expected to have major impact on the local currency.

John Wraith, senior economist at UBS, notes, “The current account deficit will need to rapidly shrink to more manageable size, and the quick way for this to happen is through a big exchange rate adjustment.”

While, the UK economy will also publish its third GDP estimate for the first quarter of 2016, with markets predicting 0.4% growth in Q1 q/q after 0.6% in Q4 2015, while annual GDP growth is expected to show a 2.0% expansion, following 2.1% in the previous quarter.

GBP/USD: Technical Levels

Haresh Menghani, Analyst at FXStreet explains, “On 1-hourly chart, the pair is oscillating within a short-term ascending trend-channel formation and has now moved closer to the channel support near 1.3385-80 region, also coinciding with 50-hourly SMA support. Hence, a break below this immediate support confluence might accelerate the fall immediately towards 1.3300 round figure mark, below which the pair could be drop back towards 1.3215-1.3200 horizontal support before heading back towards multi-decade lows to test 1.3150 support area.”

“Alternatively, should the pair manage to hold and rebound from 1.3385-80 confluence support it could immediately rise towards 20-hourly SMA resistance near 1.3440-45 region, which if conquered would reaffirm near-term movement within the short-term ascending channel.”