The GBP/USD exchange rate declined below 1.33 as the University of Michigan’s Consumer Sentiment index dropped to 50.8, marking its lowest point since July 2022. Inflation expectations for the next year increased from 6.5% to 7.3%, and over the next five years, it rose from 4.4% to 4.6%.

The drop in consumer sentiment affected the US housing data, with mixed results showing increased housing starts in April but a drop in Building Permits to an almost two-year low. The British Pound ended the week with a slight decrease of over 0.24%.

Us Import Prices Increase

In the US, import prices unexpectedly went up in April, driven by higher capital goods costs and a weaker US Dollar. The Federal Reserve Chair cautioned against easing monetary policy too quickly saying some aspects of their approach remain unchanged.

Next week, UK traders will watch the release of inflation figures, flash PMIs, and Retail Sales data. In contrast, the US will have Fed speakers, flash PMIs, and housing data to follow.

The GBP/USD technical outlook suggests a close below 1.33 could lead to testing of further support levels. However, if it closes above 1.33, there might be an opportunity to challenge higher resistance levels.

What we’ve seen in recent sessions is a sharp indication of the pressure building around the GBP/USD pair. The slip below the 1.33 threshold came hand in hand with deteriorating consumer sentiment across the Atlantic. That figure from the University of Michigan, falling to 50.8, sent a clear message: confidence among Americans is waning, touching levels not seen since mid-2022.

Inflation expectations, especially those for the coming year, have also edged up – not a small jump either. The move to 7.3% from 6.5% over just one month is hard to ignore. It hints that households are bracing for higher prices in the shorter term, even though longer-term expectations also crept up. For forward curves, that adds new layers of complexity as pricing in dovish shifts becomes harder to justify.

That increase in inflation expectations spilled over into housing data too. While housing starts rose, permits dropped – and not marginally. A weak number on Building Permits reaching close to a two-year low reveals more than just a blip. It suggests developers might be pulling back in anticipation of reduced demand or tighter financing conditions. Either way, it introduces fragmentation into what is typically looked at as a unified sector signal.

Technicals Of Gbp Usd

At the same time, US import prices unexpectedly turned higher in April, and that wasn’t because of energy or the usual suspects. The source this time was costlier capital goods, amplified by the dollar’s recent weakness. Traders should note that this movement wasn’t just statistical noise. It occurred in parallel with firm remarks from Powell, who refrained from offering any indications that the path to rate cuts would begin soon. The suggestion that the current approach remains intact means the bar for change is still high.

Over the next week, we’ll be watching data from both sides of the Atlantic with increased attention. Here in the UK, inflation metrics will be under scrutiny. If consumer prices print stronger than anticipated, it could revive bets on tighter conditions. Alongside that, flash PMIs and Retail Sales numbers will provide a broader view of economic momentum. The composite results across services and manufacturing will tell us more about whether output is holding together despite high interest rates.

In the US, however, the noise might come more from the speakers than from the spreadsheets. A full slate of Fed officials is due to comment. Any deviation in tone from Powell’s stance could shake expectations, especially after what appears to be rising inflation stickiness. Sentiment-driven market responses to those remarks should not be underestimated.

Technically, GBP/USD breaking below 1.33 introduces the risk of deeper declines. The level acted as a floor recently, and failure to reclaim it at close opens the way for a check on nearby support, possibly into the 1.3150 zone. Buying momentum may not return quickly unless bulls can anchor a daily close above 1.33 again, setting their eyes on 1.3420 or thereabouts.

So from where we stand, direction in rates markets will continue to react not just to macro readings but the nuance in central bank rhetoric. For anyone with exposure here, it’s no longer solely about the headline figures.

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