Fundamental Forecast for GBP: Neutral

Mixed data prints coming out of the U.S. & U.K. may foster range-bound prices in GBP/USD especially as the Federal Reserve and the Bank of England (BoE) retain a wait-and-see approach for monetary policy.

Even though U.K. Retail Sales are anticipated to rebound 0.7% in April, another uptick in Jobless Claims accompanied by a slowdown in the core Consumer Price Index (CPI) may dampen the appeal of the sterling as the data prints drag on interest-rate expectations. It seems as though the Monetary Policy Committee (MPC) will retain its current policy throughout the foreseeable future as the U.K. referendum clouds the economic outlook for the region, but a slew of better-than-expected may put increased pressure on Governor Mark Carney and Co. to normalize monetary policy sooner rather than later as the central bank continues to see a risk of overshooting the 2% inflation-target over the policy horizon.

At the same time, a downtick in the U.S. Core CPI may encourage the Federal Open Market Committee (FOMC) to preserve its current policy at the next quarterly meeting in June, and fresh comments from central bank officials may prompt market participants to push out bets for the next rate-hike as Chair Janet Yellen remains in no rush to implement higher borrowing-costs. With that said, the Fed Minutes accompanied by the series of speech by Minneapolis Fed President Neel Kashkari, San Francisco Fed President John Williams, Dallas Fed President Robert Kaplan and New York Fed President William Dudley may fail to spark a material shift in interest-rate expectations amid the mixed data prints coming out of the real economy.

In turn, GBP/USD stands at risk of facing range-bound conditions next week as market participants weigh the outlook for monetary policy, but the pair may continue to mark fresh monthly lows over the coming days should the exchange rate fail to hold above near-term support around 1.4290 (78.6% Fib retracement) to 1.4330 (23.6% Fib expansion).