GBP/USD Daily Fundamental Analysis for May 3, 2011

UKwill release PMI manufacturing for April with expectations showing a decline to 57.0 from 57.1. An improvement in PMI manufacturing is expected to push the pair up as it will provide clues that the British economy is going to continue growth in the second quarter after last week data had shown that the UK grew 0.5% in the first quarter from the 0.5% contraction in the fourth quarter while the opposite is true as it will arouse skeptics with regard recovery path.

Thereafter, at 14:00 GMT, US factory orders report is due where analysts predict the reading to soar1.7% from the previous 0.1% drop, yet it is expected to have slight effect on the pair’s movements.

According to the latest data releases and announcements from both economies, the outlook for the pair is bullish as investors expect the BoE to raise interest rate before the Fed. This week, the BoE will announce rate decision for the month of May, where projections refer to holding monetary stance unchanged, yet expectations show that they will raise interest rate during the undergoing quarter, probably in June.

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