- GBP/USD initially spiked up before retreating on the UK data-dump.
- UK Q2 GDP contracted 0.1%, monthly statistics remained fairly mixed for June.
- US dollar weakness initially helped cable bulls but Fed’s resistance to welcome inflation probed upside momentum.
- First impressions of the US Michigan Consumer Sentiment Index for August will be eyed to confirm inflation-linked optimism.
GBP/USD takes rounds to 1.2200, paring intraday losses, as the UK’s second quarter (Q2) Gross Domestic Product (GDP) shrank less than expected. It’s worth noting that the rest of the data-dump statistics, mainly monthly, marked better-than-expected figures but the actual readings are way too low than their priors.
That said, the headline UK Q2 GDP flashed -0.1% QoQ figures versus -0.2% forecast and 0.8% previous readings, per the first estimations from the UK’s National Statistics. Additionally details suggest that the monthly GDP contracted 0.6% MoM versus -1.3% expected and 0.5% prior. Further, the Industrial Production and Manufacturing Production readings marked upbeat YoY figures while reporting the softer monthly data, which are better than forecast disappointed. The figures couldn’t renew optimism for the GBP/USD traders as the Bank of England (BOE) has already conveyed fears of economic weakness. Hence, the quote remains pressured despite the latest rebound.
Also read: UK Manufacturing Production drops 1.6% MoM in June vs. -1.8% expected
On the other hand, the US Dollar Index (DXY) struggles to defend the bounce off a six-week low after declining for the last five consecutive days. The greenback’s previous losses could be linked to the downbeat prints of the US inflation data and firmer employment figures. However, the Fed policymakers’ resistance to welcoming the much-awaited change in price pressure seems to challenge the market’s optimism.
It should be noted that the UK’s political uncertainty, after Boris Johnson’s readiness to step down, joins the Brexit-linked pessimism to exert additional downside pressure on the GBP/USD prices. Recently, the final two candidates for the UK Prime Minister’s (PM) post, namely ex-Chancellor Rishi Sunak and Foreign Minister Liz Truss, are likely head-to-head as the former lauds his strategies while the latter pushes for diplomatic conditions.
Having witnessed the initial reaction to the UK data dump, the GBP/USD traders should wait for the preliminary reading of the US US Michigan Consumer Sentiment Index for August, expected at 52.5 versus 51.5 prior, for clear directions. Also important will be the chatters surrounding inflation and the Fed’s next move.
Technical analysis
The GBP/USD pair’s further weakness aims for the 21-DMA support around 1.2090. However, a clear downside break of the previous resistance line from mid-June, around 1.1940 at the latest, could challenge the bears afterward. Meanwhile, recovery moves remain limited until crossing an 11-week-old downward sloping resistance line, at 1.2245 by the press time.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD failed just ahead of the 200-day SMA
Finally, AUD/USD managed to break above the 0.6500 barrier on Wednesday, extending the weekly recovery, although its advance faltered just ahead of the 0.6530 region, where the key 200-day SMA sits.
EUR/USD met some decent resistance above 1.0700
EUR/USD remained unable to gather extra upside traction and surpass the 1.0700 hurdle in a convincing fashion on Wednesday, instead giving away part of the weekly gains against the backdrop of a decent bounce in the Dollar.
Gold keeps consolidating ahead of US first-tier figures
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Ethereum suffers slight pullback, Hong Kong spot ETH ETFs to begin trading on April 30
Ethereum suffered a brief decline on Wednesday afternoon despite increased accumulation from whales. This follows Ethereum restaking protocol Renzo restaked ETH crashing from its 1:1 peg with ETH and increased activities surrounding spot Ethereum ETFs.
Dow Jones Industrial Average hesitates on Wednesday as markets wait for key US data
The DJIA stumbled on Wednesday, falling from recent highs near 38,550.00 as investors ease off of Tuesday’s risk appetite. The index recovered as US data continues to vex financial markets that remain overwhelmingly focused on rate cuts from the US Fed.