UK growth slows, sterling risks remain low -by Ecork

GBP/USD Price Analysis and News

  • UK GDP Contracts in March
  • The risk of the British pound against the US dollar remains low

UK GDP summary for the first quarter

United kingdom GDP Q4 SS: 0.8% vs exp. 1.0% (before 1.0%) March m / m: -0.1% vs exp. 0.0% (before 0.1%)

UK Q1 GDP came in below expectations across the board, with the quarterly figure rising 0.8% (1.0% expected). While the March reading showed a surprising 0.1% contraction. Given the Bank of England’s Monetary Policy Report last week, this further complicates their view that growth will slow materially throughout the year, highlighting the risks of stagflation facing the UK economy. What’s more, with cost-of-living pressures now emerging, growth will take an even bigger hit in the second quarter. Reacting to the data, the cable saw a marginal decline, dropping below the 1.2200 level before rebounding quickly. However, with risk appetite remaining taut, the path of least resistance is a drop in sterling.

On the technical front, there is not much support until 1.2073 (May 2020) with 1.2000 below. Meanwhile, resistance is at 1.2400. The bias continues to fade as GBP/USD gains. Elsewhere, upside risks remain for the EUR/GBP as European Central Bank officials talk about the possibility of a rate hike in July. In addition to the fact that the pound has a higher beta for the stock markets, which makes the currency more vulnerable when selling shares.

GBP/USD Chart: Daily Time Frame

Source: RefinmeTeff

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