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GBP/USD to Target 5-Year Highs as U.K. 1Q GDP Fuels Rate Expectations

GBP/USD to Target 5-Year Highs as U.K. 1Q GDP Fuels Rate Expectations

David Song, Gregory Marks,
gbp/usd to target 5 year high on uk gdp.

U.K. First Quarter GDP

The advance U.K. 1Q GDP report may heavily influence the GBP/USD ahead of the next Bank of England (BoE) meeting on May 8th as the stronger recovery raises the outlook for growth and inflation.

Indeed, the BoE may come under increased pressure to normalize monetary policy sooner rather than later as Governor Mark Carney sees a stronger recovery in 2014, and the central bank may adopt a more hawkish tone going into the second-half of the year as the pickup in economic activity raises the prospects for stronger price growth. With that said, it seems as though the Monetary Policy Committee (MPC) will do little to halt the ongoing appreciation in the British Pound as it helps to achieve price stability, and the GBP/USD may continue to carve a series of higher highs & higher lows this year amid the shift in the policy outlook.

GBP/USD Technical Outlook

As the GBP/USD pair sits just below 2009 highs, data such as this first quarter GDP reading becomes increasingly more important. Employment data has continued to strengthen, but inflation has not risen as fast as market participants first speculated when they were the bid on GBP/USD in 2013 and Q1 2014. The pair has found itself at levels such as this before including in 2011 and 2009. For market participants to justify a rise above the 2009 high, it is likely that GDP and other data sets (including inflation) will need to beat market expectations by a long-shot.

gbp/usd chart

GBPUSD April 28th, 2014 (1M Chart)

british pound 1 month chart.

Source: FXCM Marketscope

GBPUSD April 28th, 2014 (1M Chart)

gbp pound sterling april chart.

Source: FXCM Marketscope

Gregory Marks, DailyFX Research Team

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