Pound shrugs off solid UK GDP

The British pound is in negative territory in the Friday session. Currently, GDP/USD is trading at 1.3780, down 0.25% on the day.

UK GBP stronger than expected

The week is wrapping up with a data dump out of the UK on Friday. The highlights were the GDP quarterly and monthly reports. Although both releases were stronger than expected, it wasn’t enough to bolster the pound, which is in negative territory on Friday. The Covid pandemic has resulted in sharp, double-digit swings in GDP. The economy went into a tailspin in Q2 (-20.2%), but then bounced back in Q3 (+15.5%). As expected, the first quarter of 2021 showed the economy levelling off. However, the read of +1.0% was slightly better than the street consensus of +0.5%. Monthly GDP recovered from a dreadful reading of -2.6% in November, posting a solid gain of 1.2%, edging above the estimate of 1.0%. Considering that the UK is under lockdown, the fact that the GDP releases were slightly stronger than expected is good news. Despite these respectable numbers, investors didn’t show the pound any love on Friday. This could be due to the headlines that the UK economy contracted 9.9% in 2020, its worst performance on record. Still, the economic picture over the next few months is one of cautious optimism. With the vaccine rollout gathering steam, this should lend a boost to the economy moving forward in 2021. The ING Group is projecting a strong rebound for the UK, to the tune of 5% in the second quarter.

On the manufacturing front, the news was not as positive. Manufacturing Production for December slowed to 0.3%, down from 0.7% beforehand. This was well off the estimate of 0.7%. The manufacturing sector continues to point to expansion, and this trend will need to continue if the UK economy is to continue to recover.

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GBP/USD Technical

  • There is weak resistance at 1.3808, a line which was tested earlier in the week. Above, there is resistance at the round figure 1.3879.
  • There is support at 1.3616. Below, we find support at 1.3495

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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