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The pound got a pounding last week, due to the weaker-than-expected U.K. GDP report, which weakened expectations for a May BOE rate hike.

This week, however, there are a bunch of PMI reports that may revive rate hike expectations and finally put an end to the pound’s two-week losing streak.  

Industry PMIs (starting on May 1, 8:30 am GMT)

Markit is scheduled to print the manufacturing, construction, and services PMI readings for April in the next few days, which will give pound traders an idea of how the U.K. economy fared.

And if the numbers are good enough, then there’s a good chance that rate hike expectations may recover. And that, in turn, may allow the pound may to finally end its two-week losing streak.

Anyhow, the PMI reports will be released during the London session.

And so far, the consensus is that the PMI reports will paint a mixed yet net positive picture since the manufacturing PMI is expected to dip from 55.1 to 54.9, but the construction PMI is expected to jump from 47.0 to 50.9. And the same can be said of the services PMI, which is expected to improve from 51.7 to 53.3.

Oh, do note that the services PMI usually has the biggest impact on the pound since the service sector comprises the majority of overall economic activity in the U.K. Although it’s worth mentioning that the manufacturing PMI also has its fair share of generating volatility.

Lords’ Vote On Brexit Amendment (today, 2:00 pm GMT)

Brexit-related events and headlines have been pushed to the backseat recently.

Even so, it’s always good to be aware of them, especially the ones that are scheduled (but are not in the forex calendar).

And to that end, just know that the House of Lords are expected to vote on a cross-party amendment proposal to block a “no deal” scenario later today.

If this proposal is passed, then it would give Parliament the power to block Theresa May’s government from leaving the E.U. without  a deal.

The proposal would also effectively give Parliament the power to potentially vote to stay in the E.U. single market. And pound bulls usually like that.

Anyhow, unnamed Tory sources say the Peers will likely vote to support this proposal later and MPs at the House of Commons are supposedly also willing to give a favorable vote in next month’s meeting.

Last Week’s Price Review

The pound managed to recover some losses against the euro so the pound is now the third worst-performing currency of the week while the euro was demoted to the second weakest currency (as of 2 pm GMT). This marks the second straight week of net losses for the pound.

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart

Interestingly enough, the pound was actually the second best-performing currency for most of the week, bowing the knee only to the mighty Greenback.

The pound’s climb was slow and steady and there weren’t really any direct catalysts for the pound. Also, most market analysts were only focused on GBP/USD so they were constantly bleating about how weak the pound was, disregarding the fact that the pound was overpowering the rest of its peers.

Anyhow, the probable reason for the pound’s initial broad-based strength was likely due to short-covering after last week’s pound beat-down, as well as preemptive positioning ahead of the U.K.’s GDP report.

Another probable reason is monetary policy divergence since the Fed and the BOE (and the BOC as well) still have a hawkish bias. They have also hiked their respective policy rates, and are expected to continue doing so, assuming economic conditions continue to evolve as expected.

Sadly for pound bulls, Friday rolled around and delivered a disappointing Q1 GDP report.

As for specifics, the GDP report revealed that the U.K. economy only grew by 0.1% quarter-on-quarter, missing expectations for a 0.3% quarterly expansion.

More importantly, the 0.1% rate of quarterly expansion is way weaker than the BOE’s forecast for a 0.4% increase, as laid out in the BOE’s February Inflation Report. And that very likely derailed expectations for a May BOE rate hike, causing the pound to plummet hard across the board, erasing its gains on most pairs in the process.

As an odd side note, the pound actually started to weaken a couple of hours before the GDP report was released. Whether this was due to a leak or innocent preemptive positioning is not clear, but there you go.