GDP growth in the first quarter was reported to have declined by 2.0% which is the largest drop since the financial crisis. On a month over month basis, the Office for National Statistics revealed a decline of 5.8% versus the analyst forecast for a much larger drop of 7.9%.
Considering that the UK was in lockdown for all of April, next month’s figures will likely be worse.
Today’s figures stand to reduce speculation that the BoE will ease monetary policy further in June although market participants will continue to watch incoming data for any signs that could point to further action from the central bank.
The UK has been hit hard by the Coronavirus as the death toll has exceeded 40,000 at this point which is the second-largest in the world. The United States crossed over the 80,000 mark earlier this week with more than 1.4 million cases.
Fed Chair Powell will be speaking later in the day which stands to bring volatility to the markets. There have been some talks of negative rates in both the US and the UK although Fed member speeches from earlier in the week suggest this won’t be on Powell’s agenda. Similarly, comments from BoE Governor Bailey last week signal that the BoE, while not ruling out negative rates, will look to other policy measures first if further action is needed.
GBP/USD is barely holding above support at 1.2266 which is considered the lower limit of a range that has been playing out for more than a month.
A break lower from here would activate a double top pattern which could lead to a decline below the 1.1900 handle.
The pair might need a catalyst for a downside break which Powell could potentially provide in his speech later today.
To the upside, resistance for the session ahead is seen at 1.2310.
- GBP/USD is on the verge of breaking lower from a double top technical pattern.
- UK GDP growth fell notably in the first quarter and on a month over month basis. GDP has likely declined further in April as the country was in lockdown the entire month.