GBP/USD defends 1.4100 after UK Q1 GDP, BOE’s Bailey, US inflation eyed

• GBP/USD extends rebound from intraday low following better-than-forecast UK GDP.
• UK Q1 GDP drops lesser than 1.6% on QoQ, monthly figures came in stronger.
• Risk aversion backs US dollar ahead of the key US inflation for April.
• Brexit news came in mixed, UK PM Johnson sounds cautious over unlock, pushes for more job creation.

GBP/USD jumps 15 pips to 1.4130, still down 0.10% intraday, following the key UK data during early Wednesday. Although the headlines GDP came in negative, details suggest upbeat outcomes and back the cable buyers. However, the risk-off mood before the US inflation figures restrict the pair’s upside moves.

UK Q1 GDP dropped less than 1.6% QoQ to -1.5%, versus +1.3% prior. Further information reveals the yearly growth figures matched the -6.1% forecast compared to -7.3% previous readouts. It should be noted that the figures concerning Manufacturing and Industrial Production, not to forget trade data, also came in positive.

Read: UK Manufacturing Production jumps by 2.1% MoM in March vs. 1.0% expected

Following the data, UK Finance Minister Rishi Sunak said, “Despite a difficult start to this year, economic growth in March is a promising sign of things to come."

Other than the data, fears of less duration of the post-Brexit trade deal over North Ireland (NI) protocol and British scientists warning on the unlock also directs immediate GBP/USD moves. Further, UK PM Boris Johnson’s readiness for additional stimulus and limited easing on the activity restrictions add to the market filters.

Market sentiment dwindles as investors turn cautious ahead of the key US Consumer Price Index (CPI) data for April, up for publishing around 12:30 GMT. Fed policymakers have been tired of rejecting taper tantrums, also backed by Friday’s US jobs report. However, strong US fundamentals and sustained push for more stimulus keep markets hopeful of some adjustments to the Fed’s easy money policy.

Read: US Consumer Price Index April Preview: The two base effects of inflation

Other than the pre-data fear, geopolitical tension at Gaza strip, between Israel and Palestine, joins the mixed updates over the coronavirus (COVID-19) and vaccines to weigh on the market sentiment.

While portraying the mood, stock futures in the US and the UK are offered for the third consecutive day whereas the US 10-year Treasury yields remain unchanged around 1.62%, after rising two basis points (bps) the previous day. Further, the US dollar index (DXY) also benefits from the risk-off mood as it refreshes the weekly top, up 0.20% near 90.35 by the press time.

Looking forward, BOE Governor Andrew Bailey’s speech at an online event hosted by the International Swaps and Derivatives Association will precede the US CPI release to direct the near-term GBP/USD moves. Also, BOE’s Bailey didn’t speak anything major to back the GBP/USD the previous day, he has a reason to unveil cautious optimism during today’s event.

It should, however, be noted that the sterling traders will be more interested in the US CPI and may cheer any hints of temporary price pressure inside America.

Technical analysis

The upper line of the one-month-old rising trend channel around 1.4145 tests GBP/USD buyers amid overbought RSI conditions, suggesting a pullback move towards the previous key resistance area around 1.4020-10 comprising multiple tops marked since early March.