British Pound picks up as Iran peace hopes offset soft UK GDP data

GBP/USD appreciates to the1.3430 area after bouncing near 1.3300 on Thursday.
Reports of advances in the US-Iran negotiations have offset the impact of rather downbeat UK macroeconomic data.
UK GDP contracted 0.1% in April as Industrial Production stalled.

Guillermo Alcala FXStreet

The British Pound (GBP) maintains a moderately positive tone against the US Dollar (USD) on Friday, as investors’ optimism about a US-Iran peace deal has offset rather uninspiring UK data. Bulls are testing the key 200-day SMA at 1.3415 at the moment, after bouncing from lows just above 1.3300 on Thursday.

The pair is drawing support from US President Donald Trump’s comments claiming a breakthrough in the US-Iran negotiations, which, in his words, may lead to a peace agreement in the “coming days”. Iran has shown a more contained enthusiasm, although a government spokesperson affirmed in local media that a deal “is closer than ever before.”

UK economy contracted in April

Earlier in the day, data from the UK National Statistics Office showed that the Gross Domestic Product (GDP) contracted at a 0.1% pace in April, following a 0.3% increase in March. Beyond that, Industrial Production stalled, against market consensus expectations of a 0.1% increase, while, on the positive side, Manufacturing Production rose 0.4% against expectations of a 0.2% decline.

In the US, Producer Price Index (PPI) data released on Thursday showed that prices at factory gates accelerated to a 6.5% yearly rate, its fastest pace in three-and-a-half years. The Core PPI, however, remained steady at a 4.9% year-on-year growth, against market expectations of a 5.4% reading, hinting that spillover from the energy shock might have been contained and pushing back hopes of Federal Reserve (Fed) rate hikes.

Later on Friday, the US Michigan Consumer Sentiment Index is expected to show that US buyers’ optimism remains near historic lows, amid the high cost of living. The risk of this release is skewed to the downside for the US Dollar.

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

Industrial Production (MoM)

The Industrial Production index, released by the Office for National Statistics on a monthly basis, measures movements in the volume of output for UK production industries: manufacturing, mining and quarrying, energy supply, and water and waste management. . Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

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