The Bank of England’s rate decision has been an ominous presence around the past three industrial production releases, and this month will be no different. The central bank will deliberate on whether to change its benchmark interest rate the following day, with many expecting the MPC to keep rates unchanged as inflation concerns mount. Although, the pace of inflation slowed a bit in March gaining 0.4% versus 0.7% the month prior, the annualized rate remains at 2.5%. Record food and oil prices-which just rose to almost $121 per barrel, are expected to push inflation toward the central bank’s 3% threshold. However, the housing market has continued to weaken with prices falling another 1.3% in April, according to HBOS - U.K.’s largest lender. Consumers are starting to whither in the face of the housing headwinds, with retail sales falling 0.4% in March. The forward looking CBI distributive trades report showed retailers outlook crumbling as it printed at -26, over eight times lower the -3 expected. Although, pound bulls were encouraged by the Q1 GDP report showing 0.4% growth, after the IMF reduced growth expectations for the country to 1.6% from 3.1%, recent data has dampened their enthusiasm. Gfk consumer confidence and PMI construction fell , and PMI services dropped to 50.4 from 52.1in March.

Industrial production has beat estimates the last two months with strong demand from the Eurozone based on their favorable exchange rate, which widened in March. The expectations are that production declined in March by 0.1%, so a surprise is very feasible. Considering the pair has been trading near the lower band of it s recent trading range between 1.9600 and 2.000, continued strength in production may give way to significant upside momentum. However, giving the recent weak fundamentals , we would look for increase in production of 0.2% beating expectations by 0.3%.With a confirmed, positive fundamental print we will look for a five-minute green candle to confirm entry on two lots of GBPUSD. Our initial stop will be set at the nearby swing low (or reasonable distance) and this risk will determine our first target. Our second target will be based on discretion and to preserve profit we will move the stop on the second lot to break even when the first half of the trade reaches its target.

Current weakness in domestic spending and the services sector has many expecting the BoE to signal a rate cut coming at the June meeting. A bigger than expected decline in production would strengthen that argument and trigger a short trade. We will follow the same strategy for a short as the long above, just in reverse.

Terri Belkas is a Currency Strategist at FXCM.