Aside from the Reserve Bank of Australia’s key policy decision scheduled for Tuesday, the current week will be focused primarily on major economic data releases and other macro events emanating from both the UK and US. GBP/USD will therefore be a central highlight for currency movement this week.
From the UK, this week features the monetary policy and interest rate decision from the Bank of England on Thursday. Though the BoE is not expected to raise its official bank rate from the current 0.25%, the Monetary Policy Committee has been divided on the issue, and speculation has continued that a rate hike may be on the horizon. Any hawkish talk from the BoE on Thursday would reinforce this speculation, potentially lending a further boost for sterling. Also on the schedule for the UK this week are key PMI numbers – manufacturing PMI on Tuesday (54.4 forecast), construction PMI on Wednesday (54.2 forecast), and services PMI on Thursday (53.7 forecast).
From the US, the primary event will be the jobs report for July, featuring the headline non-farm payrolls release. Currently, consensus expectations are running around 180,000 jobs added in July, after the previous month’s better-than-expected 222,000. But even before the jobs report, other key US releases will include Tuesday’s ISM manufacturing PMI (56.4 forecast), Wednesday’s ADP jobs report (187,000 forecast), and Thursday’s ISM non-manufacturing PMI (56.9 forecast).
Amid this flurry of events from the UK and US, GBP/USD remains entrenched in a clear uptrend that has been driven in large part by prolonged weakening of the US dollar. On Monday, this uptrend extended higher to approach the 1.3200 handle, establishing a new 10-month high in the process. While the downward spiral for the US dollar is arguably due for some relief, the pound could see a significant boost from the Bank of England if Governor Mark Carney and company extend the global trend towards policy tightening by striking a hawkish tone. If this is indeed to be the case, GBP/USD has the potential to continue its entrenched uptrend towards the next key resistance around 1.3250. With any breakout above 1.3250, a further upside target resides at the psychologically-important 1.3500 resistance level.