British Pound holds above 1.3500, as UK GDP, manufacturing data beat expectations

GBP/USD steadies around 1.3520 on Thursday, nearly 1% below weekly highs.
UK GDP and Manufacturing Production figures beat expectations in March.
The turmoil in the UK's Labour Party is keeping the Pound's upside attempts limited.

Guillermo Alcala FXStreet

The Pound (GBP) remains practically flat against the US Dollar (USD) on Thursday, trading at 1.3520 at the moment of writing, and consolidating losses after pulling back from 1.3650 highs earlier in the week. The pair, however, is likely to draw some support from UK data, as Gross Domestic Product (GDP) and manufacturing figures released on Thursday have beaten market expectations.

British preliminary Q1 GDP data revealed that the economy accelerated to a 0.6% growth in the first three months of the year, as expected, following a 0.2% growth in the previous quarter. The positive surprise, however, was the 0.3% GDP growth posted in March, which beats expectations of a 0.2% contraction and eases concerns about a sharp economic downturn stemming from the war in Iran.

Furthermore, Manufacturing Production bounced up strongly in March, with a 1.2% growth, following a downwardly revised 0.2% contraction in February, and also beating expectations of another 0.2% contraction. Finally, UK services activity, as measured by the Index of Services, accelerated to a 0.8% growth in March from 0.5% in February and above the 0.6% market consensus.

A few minutes earlier, US President Donald Trump left the Temple of Heaven after his first meeting with Chinese President Xi Jinping, and said that the meeting was “great”. Trump is visiting China on a two-day summit with Jinping, aimed at improving trade relations with the Asian country, where controversial issues like the war in the Middle East and US support for Taiwan’s independence will play a key role. Investors are holding their breath awaiting the outcome of the summit.

In the UK, political uncertainty remains high, and has been weighing on the Pound, which has lost nearly 1% so far this week. Labour Party’s defeat at last week’s local elections has triggered a rebellion within the same, with some officials emerging as candidates to replace Prime Minister Keir Starmer. He is resisting pressures to resign and warned that a leadership contest in the party would generate “chaos”, but he is walking on thin ice.

Economic Indicator

Gross Domestic Product (QoQ)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The QoQ reading compares economic activity in the reference quarter to the previous quarter. Generally, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Economic Indicator

Gross Domestic Product (MoM)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Economic Indicator

Manufacturing Production (YoY)

The Manufacturing Production released by the National Statistics measures the manufacturing output. Manufacturing Production is significant as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. A high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or bearish).

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