The British pound has edged lower on Friday. In the European session, GBP/USD is trading at 1.2594, down 0.47%. The pound is down 1.1% this week and fell to 1.2489 earlier today, its lowest point since November 23.
UK Economy Ekes Out a 0.1% Gain
It wasn’t a spectacular GDP report but a gain is a gain. The UK economy posted a gain of 0.1% m/m in February, a second month of expansion after an upwardly revised gain of 0.3% in January. The UK sustained a technical recession in the second half of 2023 but is on track to post a slight gain in the first quarter of this year.
The UK manufacturing sector has been struggling but posted an impressive rebound in March. Manufacturing production jumped 1.2% m/m, up from -0.2% in February and blowing past the market estimate of 0.1%. Industrial Production jumped 1.1% m/m, following a 0.3% decline in February and above the market estimate of zero.
The UK economy is still fragile despite the slight rise in GDP. Services posted a weak gain of 0.1% m/m in March and construction output fell by 1.9%. The UK is wallowing at the back of the G-7 economies, ahead of only Germany.
The Bank of England has held rates for five straight times and today’s data won’t change its cautious stance of “higher for longer”. Inflation dropped to 3.4% in February but remains well above the 2% target and the BoE will be reluctant to trim rates until inflation declines further.
In the US, Fed members are sounding hawkish about rate cuts after surprisingly strong data in March. Nonfarm payrolls crushed expectations last week with a gain of 303,000, while CPI accelerated for a second straight month and hit 3.5%. Federal Reserve members John Williams and Susan Collins both signaled that the Fed was not yet confident that inflation was moving down to 2% and there was no need to rush into cutting rates.
GBP/USD Technical
- GBP/USD has pushed below support at 1.2516 and is putting pressure on support at 1.2480
- There is resistance at 1.2548 and 1.2584