The pound remained range bound against the US Dollar yesterday following the issue of upbeat economic data from both the UK and the USA. While the UK’s economy recorded better-than-anticipated growth in May, the US inflation data for June surpassed the market’s expectations. Overall, the GBP/USD currency pair fluctuated in a range of 1.1827 and 1.1947 in the past 24 hours.
Data from the ONS reveals the UK’s economy expanded by 0.50% m-o-m in May, following a contraction of 0.20% in the prior month, and eclipsed the 0.10% GDP growth forecast by economists.
In the three months ended May, the UK’s GDP increased 0.40%. On a y-o-y basis, the country’s economy expanded by 3.50% in May 2022. Service output increased 0.40% in May, aided by a 2.10% rise in human health and social work activities.
Output in consumer-facing services declined 0.10% in May, led by a 0.50% drop in retail trade. Non-consumer facing services inched up by 0.50% in May, following a decrease of 0.80% in April.
In a separate new release, the ONS stated that the UK’s construction output (in volume terms) surged 1.50% m-o-m in May, reflecting the seventh successive month of growth, following a mere 0.30% increase in April, and much higher than the 0.20% rise anticipated by the market. Fresh work recorded a growth of 2.80%, while repair and maintenance posted a drop of 0.40%.
The UK’s industrial production increased 0.90% m-o-m in May, following a contraction of 0.10% in the prior month. Economists did not anticipate any change in industrial production. At the end of May, the UK’s monthly production output stood 0.50% below its pre-pandemic February 2020 level.
The increase in industrial production was aided by an unexpected 1.40% surge in manufacturing, following a decline of 0.60% in April. Economists did not anticipate any change in manufacturing output.
Electricity, gas, steam, and air conditioning supply posted a small rise of 0.30%. However, mining and quarrying dropped by 2.70%. Water supply and sewerage decreased by 0.2%.
In the US, the Bureau of Labor Statistics stated that the country’s consumer price index (CPI) increased 1.30% m-o-m in June, following a 1% rise in the prior month, and greater than the 1.10% growth predicted by economic experts.
Almost 50% of the rise in the CPI was contributed by a 7.50% m-o-m surge in the energy index. The gasoline index rose by 11.20%. Both the food index and the food at home index inched up by 1% in June.
On a y-o-y basis, the CPI jumped 9.10% in June 2022, reflecting the steepest 12-month rise since November 1981.
Excluding food and energy, the core CPI increased by 0.70% m-o-m in June, following an increase of 0.60% in May, and greater than the 0.50% growth anticipated by economists.
On a y-o-y basis, the core CPI jumped 5.90% in June 2022. The energy index surged 41.60% during the same period, reflecting the largest yearly rise since April 1980. The food index grew by 10.4% y-o-y in June, representing the steepest yearly rise since February 1981.
The better-than-expected UK GDP growth and higher-than-anticipated US inflation data are likely to keep the GBP/USD pair range bound for the next few days.
The GBP/USD price chart shows heavy resistance for the currency pair at 1.1910. The next major support is expected only near 1.1650 levels. Additionally, the currency pair is trading below its 50-day moving average, while the stochastics indicator is descending towards the bearish zone. We are anticipating the currency pair to continue in a downtrend in the days ahead.
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