The British pound fell sharply against the US dollar after the release of statistics indicating a serious rate of decline in industrial production in the UK, which could significantly weaken the economy and affect its potential growth in the future, as well as the Bank of England's decision to raise interest rates soon.
Despite the sharp drop in the pound, the downward trend is still limited. The focus of traders and investors is more focused on the decision of the Parliament tomorrow, which will vote for amendments to the law on the exit of the UK from the EU.
According to some experts on Brexit, the UK government does not have enough resources to make key decisions and make changes, and therefore it is possible to exclude a tougher exit scenario from the EU, which many buyers of the British pound fear. If major amendments are not adopted tomorrow, the British pound may resume its upward trend against the us dollar.
As I noted above, the rate of decline in industrial production in the UK increased in April. According to the National Bureau of Statistics, the volume of industrial production in the UK in April 2018 decreased by 0.8% compared with March.
If before a number of experts referred more to the bad weather that could affect the growth rate of the UK economy earlier this year, now it is clear that there are much more fundamental reasons. This is likely to affect the next increase in interest rates by the Bank of England this year.
The report also noted that the weakness of production was observed immediately in all sectors. The sectors of the automotive industry and the production of electrical equipment have suffered particularly.
As for the technical picture of the GBPUSD pair, a lot will depend on the breakthrough of the large resistance range 1.3440-1.3475. If tomorrow's Brexit decision positively affects the pound's quotes, going beyond the above range will allow large buyers of GBPUSD to build a new upward trend, with a test of areas such as 1.3530, 1.3600 and 1.3650.
If the pressure on the pound continues, it is likely that new buyers will show interest in the pound only at the lows of 1.3300 and 1.3255.
The European currency continues to hold its positions against the US dollar, even despite the absence of fundamental statistics and the complication of trade relations between the US and the European Union.
The main focus of traders is focused on the meeting of the European Central Bank, whose decision will be published this Thursday. It is expected that the ECB leaders will clearly announce plans to reduce the asset repurchase program, but it is unlikely that they will name specific terms.
According to the forecasts of the leading expert agencies, it is expected that in July this year the ECB will reduce the program from the current volume of 30 billion euros to 20 billion euros, and in October to 10 billion euros. The completion of the program will be announced in December this year.