The British pound is directionless in the Friday session. In European trade, GBP/USD is trading at 1.3767, down 0.09% on the day.
GDP, Manufacturing Production underperform
The UK released a data damp to end the trading week, and the releases that investors were most interested in disappointed. GDP for May slowed to 0.8% MoM, well below the revised April reading of 2.0% and below the consensus of 1.0%. Although the recovery is gaining steam, and PMI reports are pointing to strong growth across economic sectors, GDP is still about 3 percent below the pre-Covid levels (February 2020). Still, the economy continues to expand, and the May report marked the fourth straight month of expansion.
With the government determined to remove all Covid restrictions in 10 days time, we can expect pent-up demand to be unleashed and boost economic growth in the H2 of 2021. That said, health officials are sounding the alarm that it is premature to remove all health restrictions, especially with the surge in cases of the Covid delta variant in the UK. If the move to reopen backfires and Covid cases soar, a lockdown of at least parts of the economy could be the result.
There was no relief from the manufacturing sector, as Manufacturing Production declined for a second successive month, with a reading of -0.1% MoM. This was well below the forecast of a 1.0% gain. Production output has been hampered by Covid and remains 3% below the pre-Covid level. Industrial Production accelerated to 0.8% in May MoM, up from a revised April read of -1.0%. Still, this fell short of the consensus of 1.5%.
Investors do not seem all that concerned with these soft numbers, as the pound is drifting on Friday.
GBP/USD Technical Analysis
- There is resistance at 1.3938. Above, there is resistance at 1.4043
- On the downside, 1.3730 is providing support. This is followed by support at 1.3627