GBP/USD Forecast: Recovery with UK coronavirus peak? Not so fast, hard economic reality ready to bite

The UK has reached the peak of the coronavirus outbreak – will these words by UK Health Secretary boost GBP/USD? So far, the currency pair has ridden higher mostly on dollar's weakness. The most recent COVID-19 statistics are stabilizing and even pointing lower yet hundreds of daily deaths – at hospitals and at care homes – still paint a bleak picture. The British government remains under heavy criticism for handling the crisis, in the first semi-virtual Prime Minister's Questions (PMQs) held in parliament. 

The current lockdown regime is set to remain in place until at least May 7 and will likely be extended. With Prime Minister Boris Johnson still out of the public eye – yet in touch with peers – any exit strategy is still kept close to the chest. That uncertainty may keep sterling from gaining further ground. 

On the other hand, the government is moving forward with preparing a survey of the population, to know the level of spread in the community and the potential level of immunity. That would help in removing restrictions. 

The longer the shuttering continues, the worse for the economy. An updated view on business sentiment is due out from the Markit/CIPS preliminary Purchasing Managers' Indexes for April. Economists expect both the Manufacturing PMI to drop and the Services PMI to fall below 30 – deeper into depression territory. 

See UK PMIs Preview: Without a light at the end of the tunnel, the only way is down, GBP/USD may fall

As mentioned earlier, the upward move in pound/dollar stems primarily from the greenback giving ground. The safe-haven dollar declined as oil prices recovered from their shocking fall earlier in the week and US coronavirus statistics also improved, especially in New York. Governor Andrew Cuomo also said that he had a "very productive" meeting with President Donald Trump, and defused tensions also contributed to a better mood.

However, the Center for Disease Control (CDC) warned that the second wave of infections may come in the winter. The World Health Organization warned that while the disease is still spreading rapidly in Africa, Latin America, and Eastern Europe. 

Updates on the coronavirus' economic carnage to the world's No. 1 economy are due out. Weekly Unemployment Claims are set to decline for the third week in a row but remain in the millions. Over 22 million Americans have lost their jobs.

See Jobless Claims Preview: Progress or exhaustion in the US labor market

Later on, Markit´s preliminary PMIs for the US are of interest – even though they do not carry the same weight as the ISM figures. Similar to the UK, additional evidence of the recession is expected.

See US PMIs Preview: Looking into the abyss

Coronavirus figures are also of interest as they provide a guide to reopening the economy. However, any return to normal also depends on testing and contact tracing. 

GBP/USD Technical Analysis

Pound/dollar is suffering from downside momentum on the four-hour chart but has recaptured the 200 Simple Moving Average. While the picture has improved, bears remain in the lead. 

Support awaits at 1.23, a low point in recent days. It is followed by 1.2250, which is the weekly low, and then by 1.2160, April's trough. 

Resistance is at 1.2380, the high point on Wednesday, and then by 1.2445, which provided support in mid-April. The net levels to watch are 1.2525 – a stubborn cap last week – and 1.2575.

More: Coronavirus: Lack of leadership may lead to L-shaped economy, markets may suffer badly