GBP/USD – British pound slips to 3-week low as UK economy stalls

GBP/USD has posted considerable losses in the Monday session. In North American trade, the pair is trading at 1.2863, down 0.61% on the day. On the release front, British GDP reports were a disappointment. Preliminary GDP for Q4 came in at 0.2%, shy of the estimate of 0.3%. The monthly GDP release declined 0.4%, short of the estimate of 0.0%. There was more bad news, as Preliminary Business Investment dropped 1.4%, its third decline in four months. Manufacturing Production dropped 0.7%, a third straight decline. There are no economic events in the United States. On Tuesday, the U.S. releases JOLTS Jobs Openings and Federal Reserve Chair Powell speaks at an event in Washington.

The British economy slowed down in the fourth quarter, with a weak gain of 0.2%, compared to 0.6% in the third quarter.  The economy expanded 1.4% in 2018, its lowest level since 2012. The catalysts behind the weak numbers are the uncertainty over Brexit, as well as weaker global growth. Business investment is on the decline, as the uncertainty over the British economy has raised alarm bells among investors. The pound is under pressure and has sagged 1.9% in February. With no solution in sight for the Brexit deal and the threat of further U.S tariffs against China in early March, the pound could be facing further headwinds.

Prime Minister May continues to look for a way out of the Brexit impasse, but this will be tricky, as the Europeans are showing little interest in her predicament with parliament. The EU has said that it will not reopen the withdrawal agreement, but parliament has already rejected the deal in its current form. As the Brexit deadline of March 29 looms closer, investors are increasingly nervous that Britain could crash out with no deal in place. This scenario would likely send the British pound sharply lower.

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GBP/USD Fundamentals

Monday (February 11)

• 4:30 British GDP. Estimate 0.0%. Actual -0.4%
• 4:30 British Preliminary GDP. Estimate 0.3%. Actual 0.2%
• 4:30 British Manufacturing Production. Estimate 0.2%. Actual -0.7%
• 4:30 British Preliminary Business Investment. Estimate -1.3%. Actual -1.4%

Tuesday (February 12)

• 8:00 BoE Governor Carney Speaks
• 10:00 US JOLTS Job Openings
• 12:45 Fed Chair Powell Speaks

*All release times are EST

*Key events are in bold

GBP/USD for Monday, February 11, 2019

GBP/USD February 11 at 11:40 EST

Open: 1.2952 High: 1.2976 Low: 1.2858 Close: 1.2863

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair posted losses in European trade and has lost more ground in North American trade

• 1.2851 is a weak support level
• 1.2910 is the next resistance line
• Current range: 1.2851 to 1.2910

Further levels in both directions:

• Below: 1.2851, 1.2729 and 1.2615
• Above: 1.2910, 1.3070, 1.3170 and 1.3258

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