UK Growth Jumps

GBPUSD is pushing higher today on the back of the latest growth data released this morning which showed that the UK moved out of recession last quarter. Prelim Q/Q GDP came in at 0.6% for Q1, up from -0.3% prior and well above the 0.4% the market was looking for. The data marks the strongest UK growth in almost 3 years with the M/M figure seen rising too by 0.4% against 0.2% prior and 0.3% expected. Looking at the breakdown of the data, services (which account for roughly 80% of the UK economy) added 0.7% in Q1 with household consumption adding 0.2%.

BOE Holds Steady

The data comes hot on the heels of the BOE yesterday holding rates unchanged, with BOE governor Bailey refusing to bow to pressure to initiate rate cuts. Bailey held steady, despite 2 BOE member voting in favour of a cut this time. Looking ahead, Bailey signalled that the bank still expects to cut rates. In the post-meeting press conference Bailey said “It’s likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates.”

Shifting BOE Risks?

Looking at the reaction in GBPUSD today, it seems that traders are less focused on near-term rate cut chances and more buoyed by the stronger UK GDP print. The read through here is that traders are potentially pricing in the risk that if the economy continues to grow, BOE easing will be delayed until later in the year.

Technical Views

GBPUSD

With the latest test of support at 1.2437 holding for now, price is potentially carving out a higher low against the 1.2306 low, suggesting room for a fresh push higher. The bear trend line and 1.2612 resistance will be the key area for bulls to overcome to turn focus to a test of 1.2832 next.