Sterling mood still on upside to astonish preliminary GDP data

We look ahead to the preliminary release of Q1 GDP on Tuesday to accelerate to 0.8% in Q1 from 0.6% in Q4' 2014, with stronger household consumption supported by lower energy prices and a rebound in investment making up for a drop in capital spending in Q4 2014. This would follow last week's more hawkish-than-expected BoE minutes, which delivered the message first communicated in the February QIR, namely that the risks to the medium-term outlook for inflation are skewed to the upside.

However all these data keeping aside, market direction may rapidly turn to the forthcoming British election where election canvassing is expected to intensify and the latest polls continue to suggest that no majority is likely to secure in parliament. If everything realized, we expect some re-pricing of the GBP rates curve and the GBP to appreciate further.

Technical watch:

A strong support can be seen at around 1.3805 levels and if a rally manages to break out a stiff resistance at around 1.4088 levels then upswings can test levels upto 1.4203 levels. On an intraday perspective one benefit from upswings as both RSI and CCI lines are signaling good converging shapes.