- The UK economy expanded by 0.1% in Q1.
- A series of data released overnight indicated that the US economy was slowing.
- The BoE increased rates by 0.25% to 4.5%, raising borrowing costs to the highest since 2008.
Today’s GBP/USD outlook is slightly bullish. The pound rose slightly after the release of UK GDP data. In Q1 of this year, the UK economy expanded by 0.1%, which was a surprise considering economists had expected it to suffer a long recession. However, in March, there was a sudden drop of 0.3%, highlighting the fragility of the economic recovery.
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Economists had predicted a growth rate of 0.1% for the quarter, expecting that output would remain stable in March.
The US dollar remained near a one-week peak, as a series of data released overnight indicated that the US economy was slowing down. The weakening economy pointed to a looming recession, causing investors to seek refuge in the dollar due to uncertainty.
Data from Thursday showed that the number of Americans submitting new claims for unemployment benefits reached a 1-1/2-year high, indicating vulnerabilities in the labor market as demand diminishes.
The same data also showed that producer prices rose slowly in April. Most economists viewed these reports as consistent with the likelihood of the US entering a recession by the end of the year.
The British pound recovered slightly on Thursday after the BOE meeting but remained lower against the dollar. As anticipated, the BOE increased rates by 0.25% to 4.5%, which raised borrowing costs to their highest level since 2008.
GBP/USD key events today
After the GDP data from the UK, investors are not expecting any more key releases from the UK or the US. Therefore, the price will likely move sideways.
GBP/USD technical outlook: Bears dominating sentiment
GBP/USD bears have successfully reversed the trend in the 4-hour chart. The price now trades well below the 30-SMA, and the RSI is nearer the oversold region. Furthermore, the price has broken below the previous low at 1.2575 and has made a lower low characteristic of a downtrend.
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The price is pulling back after the sharp bearish move. However, bulls are not showing much strength. This will allow bears to return soon and retest the next support at 1.2451.
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Saqib Iqbal
