British Pound Talking Points
GBP/USD approaches the 2021 high (1.4241) as it extends the advance from the start of the month, and fresh remarks from Bank of England (BoE) officials may keep the British Pound afloat as the central bank slows the pace of its weekly asset purchases.
Fundamental Forecast for British Pound: Neutral
GBP/USD trades to a fresh monthly high (1.4234) ahead of the last full week of May as a growing number of Federal Reserve officials warn of a transitory rise in inflation, and fresh remarks from the BoE may prop up the exchange rate as a slew of Monetary Policy Committee (MPC) members are scheduled to testify in front of the House of Commons Treasury Committee on May 24.
Source: UK Parliament
The BoE may highlight an improved outlook in front of UK lawmakers as “GDP is expected to rise sharply in 2021 Q2,” and the central bank may show a greater willingness to switch gears as “GDP is expected to recover strongly to pre-COVID levels over the remainder of this year.”
In turn, the MPC may gradually adjust the forward guidance over the coming months amid the dissent within the central bank, with one member arguing that “the improved economic outlook warranted a reduction in the degree of additional stimulus being provided to the UK economy at this meeting, by reducing the scale of asset purchases in the current programme from £150 billion to £100 billion.”
With that said, fresh remarks from BoE officials may keep the British Pound afloat amid the growing discussion within the central bank to scale back the emergency measures, and GBP/USD appears to be on track to test the 2021 high (1.4241) as it extends the advance from the start of the month.
--- Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong
