GBP/USD managed to regain bullish momentum. Previously, bears set the tone in the market since the price had rejected off the 1.3400 area. Recently, the pair has been trading with higher volatility.
The Bank of England maintained its tightening bias despite the fact that most global central banks are poised for a rate cut. The Bank of England downgraded the growth forecast for Q2 to 0% with increasing downside risk and doubts about its forward guidance. The sterling was seen to be weaker as soon as the BOE's statement. GBP could lose more ground if the second reading of Q1 GDP growth is negatively revised on Friday. The economic calendar this week is rather quiet. Consumer confidence and Lloyds Business Barometers are the most important reports.
This week the UK inflation report is going to be published. Markets have neutral and dovish expectations for the metrics. If the bearish forecast comes true, it might cause further weakness of GBP. Moreover, UK Current Account report is going to be published on Friday, which is expected to show a wide deficit of -32.0B from the previous figure of -23.7B. The report may have a significant impact on GBP.
On the other hand, USD has been hurt by the recent trade war tensions and weak economic performance which has been proved by downbeat economic reports. As a result, USD lost momentum across the board, in particular against GBP. There are a lot of economic events in the US this week. A series of data will confirm whether rthe Federal Reserve will lower interest rates at the policy meeting in July. Traders are locking in profits in USD-related currency pairs if the market is convinced that a rate cut in July is a done deal. The Dollar index is also expected to slump by nearly 1% following the Fed's dramatic dovish statement. The new home sales and the Conference Board's consumer confidence index are due on Tuesday. The consumer confidence index rose to 134.1 in May, taking it close to last October's 18-year high. The Durable Goods orders are also going to be published this week and expected to increase by 0.2% monthly in May, having rebounded from a 2.1% drop in April. Pending home sales are outstanding along with the final estimate of GDP growth for the first quarter of 2019.
To sum it up, USD is still in a better shape than GBP. The UK inflation report is expected to clear up upcoming momentum for the pair.
Now let us look at the technical view. The price has been quite volatile and corrective at the edge of 1.2750 area from where the price rejected several times earlier to continue with the preceding bearish trend. The price recently formed Bearish Continuous Divergence which also indicates the continuation of the bearish momentum quite well in the coming days. As the price remains below 1.2800 with a daily close, the bearish bias is expected to continue.