The economic data from the United Kingdom followed a similar undesirable pattern to expectations given the global pandemic and subsequent weakness the world economy is facing.
The GDP data release showed a 2% quarter-on-quarter decline for the UK economy, however this has offered no end to recent nail-biting economic readings with it also being announced that the UK economy in March alone contracted by -5.8%. The latter represents the worst reading on record for UK GDP and given that the UK entered the pandemic somewhat latter than its peers, it presents a major warning sign that the Q2 GDP reading will not be pretty.
On a fundamental basis for the UK only, the Pound should remain weak. The United Kingdom is still in a very fragile state with coronavirus disease infections, as well as no clear indication in sight for when lockdown restrictions could be noticeably eased.
Should this bleak landscape remain unchanged and as long as the USD remains resilient (a big if) there is an argument to be made that the GBPUSD could potentially return to 1.20 at some point before the second quarter of 2020 concludes. Again, the USD will have a pivotal say in this and how the Dollar has traded in recent weeks has been anything but predictable.
On the Daily charts, support marginally above 1.22 could be seen as a near-term floor for GBPUSD. This would represent roughly the lows for the Daily candlesticks on April 6, April 3 and as far back as March 16. If this level were to break, the Weekly low from August 25 2019 just above 1.2138 might become an area of interest.
EURGBP on the Daily charts continues to trade in a tight range. For a potential breakout to the upside, hypothetical buyers might wait to see if the EURGBP can break higher than 0.8862. Otherwise the continuation of a range that has been in place since early April remains on the cards.
The GBPJPY could be the pair to watch, if the right combination is in place. Pound weakness as well as a stronger JPY due to safe haven demand for the Yen would be monitored to see if the pair can possibly break below 130.48.
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