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Monthly UK GDP for April, estimated to have contracted by 18.4%, is critical given the magnitude of the plunge in a full month of lockdown. The reaction depends on the scale of the contraction, but the pound remains on the back foot, Yohay Elam, an analyst at FXStreet, informs.

Key quotes

“The lockdown was complete in April, and that will likely show in GDP figures. The economic calendar shows expectations for a collapse of 18.4% in activity, a record-breaking month.”

“Within expectations: The magnitude of the potential downfall means that any decrease of between 15% and 20% in output can be described as meeting estimates. In this scenario, the pound may remain pressured, but without a substantial change in trends.”

“Worse than forecasts: A crash worth 20% or more would already trigger doom and gloom headlines, sinking sterling. It could change estimates for the next months, especially as Britain’s lockdown has hardly been loosened.” 

“Beating estimates: If the UK only shed 15% or less of its GDP, that would show the resilience of the modern economy to withstand social distancing. GBP/USD could climb back up amid hopes for a softer blow throughout the year.”

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