Authorised and Regulated:
Middle East & Africa
United Kingdom
Asia Pacific

GBP/USD: May GDP Tilts the Narrative

  • UK data next week could be make or break for GBP/USD
  • 1.16 could prove to be a key psychological level
VARIANSE
Chief Economist
Jul 15, 2022, 6:57 AM
GBPUSD
%
sell
buy

Better-Than-Expected May GDP

UK monthly GDP rose by a better-than-expected 0.5% m/m in May, according to data released on Wednesday. That number was certainly better than the 0% economists were expecting. In addition, it represents a decent improvement from the revised 0.2% decline in April. As a result, the UK economy may just avoid slipping into quarterly contraction in Q2. Whether this will be enough to solidify a 50 bps rather than a 25 bps hike from the Bank of England when it next meets on 4 August 2022, is an entirely different matter.  

Still Loads of Uncertainty

Despite the better-than-expected figure, UK household spending on certain categories of goods and services appeared strained. This suggests a contraction in economic activity in Q3 still on the cards. A more accurate picture of Q2 activity won’t be available until the  release of the first full estimate of Q2 GDP on the 12 August 2022, well after the Bank of England meeting. Until then, expect next week’s UK employment data and June CPI data to carry extra weight, both for the Bank of England decision and the immediate fortunes of GBP/USD.

Downtrend Intact

A little over a week ago, when GBP/USD was trading at 1.1895, we suggested picking the bottom for GBP/USD was risky business. Since then the pair established a new low of 1.17603 on  14 June, before retracing some of its losses. Needless to say, the pair is still trading below  its 200-day exponential moving average after this most recent look lower, a factor which always leaves me reluctant to be a buyer no matter the forex pair. Likewise, it seems to take some pretty heavy trading volumes just to abate some of the recent declines in price. 

Intense Volumes

That said, there does seem to be more buyers jumping in when price does fall, just by the way high volumes under recent price declines don’t seem to provide the same level of price decline as they once did. Selling pressure may be finding a degree of exhaustion as price approaches the 1.16 psychological level, but it is still too early to tell. At the moment, there is no clear sign of total market capitulation yet or any clear sign of reversal. Next week’s economic data could certainly be the catalyst required to change the situation for better or worse. 

DISCLAIMER: All communication, messages, media and links distributed on this channel has been prepared by VARIANSE solely for information purposes without regard to any particular user’s investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but VARIANSE does not represent that it is accurate or complete. VARIANSE does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice. The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sales of any financial instrument. The information contained herein has no regard to the specific investment objects, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment decision. It is important to note that past performance is not indicative of future results. VARIANSE is a trading name of VDX Derivatives, authorised and regulated by the Financial Services Commission (FSC) of Mauritius. FSC license number C118023323. VARIANSE is also a trading name of VDX Limited and is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom. FCA register number 802012. This publication is not directed to residents of the United States and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Your global trading connection

We are an award-winning, internationally regulated, trusted and secure broker.

Regulated Globally

VARIANSE is authorised and trusted internationally. We have entities regulated by the FCA, FSC and LFSA.

Multi-Award Winning

VARIANSE has achieved consistent recognition from independent organisations and the financial community.

Premium Customer Support

Take comfort in an experienced team committed to providing you with rapid, efficient, and friendly support.

Tier-1 Banking Relationships

We safeguard your funds safely and securely in segregated ring-fenced client money custodian bank accounts with Barclays Bank.

RISK WARNING: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
VARIANSE is a trading name independently operated by the following regulated entities:
Copyright © 2015-2024. VARIANSE and VDX are registered trademarks. All trademarks, logos and brand names are the property of their respective owners.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
ELECTRONIC TRADING. ELEVATED