GBP/USD: Break under 1.30 to trigger a slide to support in the 1.2775-1.2800 area – Westpac

Surveys and updated Bank of England (BoE) forecasts for MPC on Thursday, May 5 will be critical in determining how aggressive the cost of living shock will be and so the vulnerability of GBP. The GBP/USD pair could slide to the 1.2775-1.2800 area on a sustained break below 1.30, economists at Westpac report.

Is UK facing a cost-of-living-crunch or a merely pause in the economic upswing?

“A series of timely surveys will be released into the end of this month and so ahead of the BoE’s early May MPC meeting. The MPC will also receive their quarterly Monetary Policy Review with its updated forecasts. Collectively, the data should provide the MPC with more insight on the potential severity of the UK’s cost-of-living crisis. The impact of the surge on discretionary spending will be a key factor for MPC’s hiking path.”

“Markets are currently pricing between 125 and 150 bps of further hikes into end 2022 though MPC has implied a softer path.” 

“GBP/USD has tested levels below 1.30. A break could trigger a slide to support in the 1.2775-1.2800 area. GBP needs a close above 1.3150 to reduce such pressure.”