- GBP/USD weakens as UK data confirms politicians’ economic fears.
- Preliminary GDP declines to 0.8% in the UK in Q1 vs. 1.0% expected, March monthly figure turns negative.
- The strength of the dollar due to risk aversion also puts downward pressure on the pair.
- The US PPI will focus investors’ attention to confirm the strong CPI figure.
The GBP/USD has moved lower and has fallen to a 24-month low around 1.2185 following the disappointment of the latest UK data at the start of the European session on Thursday. In addition to the disappointing data, risk-off sentiment is also weighing on the pair.
Data has shown that UK GDP expanded by 0.8% qoq in Q1 vs. 1.0% expected. Also, UK GDP came in at -0.1% MoM in March vs. 0.1% expected. On the other hand, industrial production and manufacturing production for March have also come in below expectations. Manufacturing production fell -0.2% MoM in March vs. 0% expected and -0.6% registered in February, while total industrial production fell -0.2% vs. 0.1% expected and -0.3% last, reinforcing the bearish bias in the pair.
Keep in mind that the Bank of England (BoE) has recently signaled recession fears and has triggered a broad atmosphere of risk aversion at its last meeting. With negative monthly GDP, market participants could rush to the safe haven at a faster pacewhich in turn could boost demand for the US dollar considering firmer fundamentals compared to the UK.
Apart from economic fears, Brexit woes also weigh on GBP/USD pricessince the European Union (EU) was willing to suspend the trade agreement with the United Kingdom if it unilaterally revokes the Northern Ireland Protocol, according to Bloomberg.
On a broader front, Covid woes and a pullback in yields seem to underpin a mixed session, which in turn keeps markets tipped to buy US dollars amid hopes of a rate hike. Fed rate of 75 basis points, especially after strong US inflation.
Therefore, GBP/USD is well poised to move lower.
Attention now turns to the US PPI Producer Price Index data for April which is expected to be 10.7% yoy vs. 11.2% previously.
GBP/USD technical levels
Source: Fx Street
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