Macroeconomic data from the United Kingdom published last week appeared mostly positive. PMI indices rose in April in both sectors, and retail sales growth in March exceeded forecasts, meaning concerns about a decline in consumer activity due to the war in the Middle East did not materialize. The economy overall remains fairly stable, and the energy sector is stable as well.

As indicated by the PMI reports, the sub-indices for prices increased significantly across both sectors, particularly for raw materials and inputs, while the finished goods price index reached 62, a record since 2023. Core inflation has slightly decreased; however, the overall index rose from 3.0% to 3.3% year-on-year, as did the retail price index.

The Bank of England, like the European Central Bank, will hold its next meeting on Thursday, April 30. After the BoE raised rates in March, investors anticipated that rates would continue to rise quickly, as the war in the Gulf triggered a surge in inflation. However, sentiments have noticeably shifted over the past couple of weeks. The Governor of the BoE, Bailey, hinted in an interview last week that there is no rush, and the market is already pricing in an unchanged rate. Likely, similar to the ECB, the BoE does not want to take hasty steps while the situation allows, as a preemptive rate hike due to rising inflation could prove premature if the war in the Gulf ends with a peace agreement and the Strait of Hormuz reopens to shipping. In this case, oil prices would decline, and the threat of rising inflation would diminish, requiring the BoE to adjust monetary policy again, but this time downwards. While the situation permits, it makes sense to wait; this position appears balanced.

The net short position on GBP has slightly decreased over the reporting week to -£4.4 billion, with the calculated price losing its upward momentum and actively trading below the long-term average.

As we expected in the previous review, the pound spent the week in a sideways range, as bullish momentum was exhausted and uncertainty remained too high. Currently, the likelihood of a downward movement has increased, with a probable decline towards technical support at 1.3375. If negotiations in Islamabad do not resume and the parties continue to exchange belligerent statements, bearish pressure will intensify, potentially leading to a move towards the broad support zone at 1.3120/60.