The GBP/USD exchange rate jumped 0.81% to an intra-day high of 1.5389 dollars per-British pound last Monday after a Bloomberg news wire report that President Barack Obama had told a Group of Seven industrial nations summit that the strong dollar was a problem. A senior U.S. official, as well as Mr. Obama himself, later denied that the comment was made. Nonetheless, the cable closed on Monday at 1.5349 dollars per-British pound, up 0.55%, making back almost all of its 0.62% loss on Friday, after the May U.S. non-farm payroll report.

The U.S. dollar struggled on Tuesday, pushing the GBP/USD up another 34 pips. The dollar weakened despite the U.S. Job Openings and Labor Turnover (JOLT) report, released by the Bureau of Labor Statistics, which said that the number of job openings rose to 5.4 million on the last business day of April, the highest since the series began in December 2000. 

The GBP/USD continued its rally another 0.94% on Wednesday to close at 1.5531 dollars per-British pound after Mr. Kaushik Basu, the World Bank's chief economist, said on Wednesday that they lowered the growth outlook for the United States to 2.7% this year, from 3.2% in January, and to 2.8% next year, from a previous forecast of 3%. He also said that the U.S. Federal Reserve should hold off on a rate hike until next year to avoid worsening exchange rate volatility and crimping global growth.

Last week, Ms. Christine Lagarde, the Managing Director of the International Monetary Fund (IMF), had urged the U.S. Federal Reserve to delay raising interest rates until at least next year. The IMF had just lowered its forecast for U.S. gross domestic product (GDP) to 2.5% in 2015, down from the previous forecast of 3.1% growth. 

The cable dropped 0.68% to an intra-day low of 1.542 dollars per-British pound on Thursday after the U.S. Commerce Department said that U.S. May retail sales climbed a seasonally adjusted 1.2%, beating economists’ forecast of a 1.1% gain in a poll by Reuters. The U.S. core retail sales excluding automobiles, gasoline, building materials and food services increased 0.7% in May, also beating the expectations of a 0.5% gain. The GBP/USD currency pair managed to bounce back to close at 1.5516 dollars per-British pound, down just 9 pips for the day.

The GBP/USD extended its rally another 45 pips to close at 1.5561 on Friday after the U.K. Office for National Statistics (ONS) said that it revised production in the construction sector to a 0.2% decline in the first-quarter of 2015 from the previous estimate of a 1.1% fall. The number for the fourth-quarter 2014 was also revised upward to a rise of 0.2%, compared with previous estimate of 2.2% fall. 

The ONS also said that it plans to revise its estimates for the U.K. GDP to 2.9% for last year, from 2.8%, and its first-quarter 2015 U.K. GDP to 0.4%, from 0.3%. The U.K. economy is gaining momentum, compared to the U.S., where last year's GDP printed at just 2.4% and there was a 0.7% decline in the first-quarter of 2015. Updated U.K. GDP figures will be released on June 30. 

As of June 9, there are 92,624 short positions of the British Pound [CME:6B], traded on the Chicago Mercantile Exchange (CME), by asset manager/institutional and leveraged funds. This is compared to about 65,544 long positions, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. Net short positions have increased about 6,131 contracts from last week where British Pound contracts are traded in units of 62,500 British pounds.

From our technical viewpoint, the GBP/USD broke out from the symmetrical triangle in March but was unable to break through the November-December 1.575 dollars per-British pound resistance levels. As we previously forecasted, the cable pulled back to the 1.53 dollars per-British pound, or 23.6% Fibonacci retracement level and bounced off the 50-day SMA. 

The currency pair rallied last week as the U.K. economy is gaining momentum and is now trading above the 200-day SMA. It is likely that the GBP/USD is heading upward to test the upper trendline resistance of the symmetrical triangle, at the 1.562 dollars per-British pound level, and make a breakout.

The downside risk for the British pound is the Greece debt drama. The U.S. dollar is expected to firm against major currencies as the negotiations between Greece, the ECB and IMF creditors are failing. The Bank of England (BoE) will release minutes of its June policy meeting on Wednesday. Earlier, the BoE said it expects CPI to pick up “notably” towards the end of this year as the effect of lower oil and food prices fades. The BoE has hinted at its first rate hike in mid-2016. 

Across the pond, the U.S. dollar could be under selling pressure if the U.S. Federal Reserve doesn’t give a clear signal when they plan their first rate hike, after their two-day meeting on Tuesday and Wednesday. With all the Greek drama and the wobbling U.S. economy, no one expects the Fed to increase the benchmark rate at this meeting, or until September.