Pound slips on soft UK data

The British pound is in negative territory in the Friday session. Currently, GDP/USD is trading at 1.3920, down 0.51% on the day.

GDP, Manufacturing Production decline

The pound has registered considerable losses on Friday after a data dump out of the UK showed some disappointing results. The monthly GDP report indicated that the economy contracted by 2.9% in January. This was considerably better than the street consensus of -4.9%, but showed a downturn in growth after a gain of 1.2% in December. As well, it was the second decline in three months, raising concerns about the health of the economy.

The UK manufacturing sector has been solid, but Manufacturing Production started the year on the wrong foot, with a print of -2.3%. This beat the forecast of -1.0% and marked the first decline after nine straight months of growth. On an annual basis, the indicator declined by 5.0%. As well, Industrial Production fell by 1.5%.

The weak UK numbers have snuffed out this week’s strong rally by the pound, which saw GBP/USD cross above the 1.40 line in today’s Asian session before retreating close to the 1.39 line. US Treasury yields movement has caused significant volatility for the dollar, but with yields stabilizing, there has been more of a focus on fundamentals, and Friday’s news clearly soured investors on the British pound. Still, the pound is poised to have a winning week and could target the symbolic 1.40 level as early as next week.

In the US, the focus will be on inflation, with the Producer Price Index expected to slow to 0.4% in February. This would mark a sharp drop from the 1.3% gain beforehand.

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GBP/USD Technical Analysis

• There is resistance at 1.3997, which is protecting the symbolic 1.40 level. The next resistance line is at 1.4113
• 1.3734 is providing strong support, followed by a support line at 1.3637

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