GBP Breaking News: UK Growth Contracts Leaving Pound on Offer

GBPUSD FUNDAMENTAL BACKDROP

The British pound looks to enter the European trading session on the backfoot after UK GDP (see economic calendar below) missed on both 3-month average and YoY figures respectively. The MoM print is quite surprising in that the economy contracted by 0.5% (quickest pace in 7 months!) as opposed to the 0.2% expected. In contrast to the prior print, the UK economy seems to be slowing despite some positives in manufacturing and trade balance figures. A high interest rate environment is clearly weighing on economic growth. Yesterday UK labor data showed some weakness as well which has supplemented today’s downside move post-GDP.

GBP/USD ECONOMIC CALENDAR (GMT +02:00)

Bank of England (BoE) market expectations (refer to table below) did not see any material change and remain in favor of a 25bps rate hike later this month. All eyes now shift to US CPI later today with any upside surprise likely taking out key support zones on GBP/USD.

BANK OF ENGLAND INTEREST RATE PROBABILITIES

TECHNICAL ANALYSIS

GBP/USD DAILY CHART

Price action on the daily cable chart has broken below bear flag support (light blue) as bears push towards the all important 200-day moving average (blue) as mentioned in my IG risk event for the week. A daily confirmation close is still required to confirm the breakout, placing more importance on US CPI.