Yahoo Finance GBP/USD Extends Losses as UK GDP Growth Falls Short
GDP grew by 1.8% in the UK during May, significantly below the analyst estimate of 5%, and following a revised contraction of 20.3% in April.
In the three months to May, growth fell by 19.1% from 10.1% in April. A significant portion of the decline is directly attributed to the lockdown measures taken to combat the Coronavirus. The hardest hit sub-sector was accommodation and food services, which saw a rolling three-month decline of 71.7%.
Despite the small recovery in May, the level of output is still 24.5% lower than where it was in February before the virus began to impact the economy.
Construction has been hit the hardest with a month over month decline of 38.8%, while services, the largest contributor to GDP for the UK, declined by 24.4% in May.
How the Bank of England responds to this report will be important for GBP/USD traders. MPC member Tenreyro will be speaking tomorrow and may provide an outlook on how the BoE may respond.
GBP/USD may not see a sustained impact from this report considering that the data is delayed and the UK has since eased restrictions which will aid the economy in its recovery.
However, investors will be keeping a close eye on incoming data to confirm that the UK economy is moving forward.
Later today, the US will release CPI figures for June.
Technical Analysis
GBP/USD turned lower after a failure at important horizontal resistance at 1.2650. The pair fell short of testing its 200-day moving average before reversing.
Support is seen nearby at 1.2495 and this level could trigger a bounce in the session ahead.
The momentum, at the moment, is firm to the downside and there aren’t any signs of buying in the early day.
The decline in the currency pair is despite a fall in the greenback as the trade-weighted dollar index is seen lingering near lows not seen since early June.
Bottom Line
GBP/USD has extended lower after GDP rose at a much slower pace in May than analysts had estimated.
Support for the pair is seen at 1.2495 in the session ahead.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
