Video Source: Bloomberg Television on YouTube
The pound remained range-bound against the greenback on Friday following the release of upbeat economic data from both the US and the UK. While the UK’s GDP data for June was overwhelmingly positive, the US producer price index data for July surpassed estimates. Overall, the GBP/USD pair traded in a narrow range of between 1.2665 and 1.2682.
According to the UK’s Office for National Statistics (ONS), the country’s economic activity rebounded with a growth of 0.50% m-o-m in June, following a 0.10% GDP contraction in the previous month and more than double the forecasts of a 0.20% increase.
Services output grew by 0.20% m-o-m in June, following a flat reading in May. Specifically, output in consumer-facing services inched up 0.50% in June, following a decline of 0.20% in May.
The preliminary data published by the ONS also indicates that the UK’s GDP inched up 0.20% q-o-q in the June 2023 quarter following a 0.10% increase in the previous quarter and surpassed forecasts of a flat reading.
In a separate news release, the ONS stated that the UK’s construction output (in volume terms) rose by 1.60% m-o-m in June following a 0.30% decline in May and surpassed forecasts of a flat reading.
The increase is attributed to a 2% increase in fresh work and a 1.10% increase in repair and maintenance. Six out of nine sectors posted an increase. In particular, infrastructure-related fresh work and non-housing repair and maintenance recorded 4.70% and 3.40% growth, respectively.
Furthermore, construction output inched up 0.30%q-o-q in the June 2023 quarter. Total construction new orders, however, fell by 7.10% (or £786 million) in the second quarter.
As per the data published by the ONS, the UK’s industrial production rebounded with an increase of 1.80% m-o-m in June, following a decline of 0.60% in the previous month and greater than forecasts of 0.20% growth. The reported figure reflects the strongest monthly production growth since August 2020.
Furthermore, the UK’s manufacturing production rose by 2.40% m-o-m in June, following a 0.10% decline in May and greater than forecasts of a 0.20% increase. The reported figure reflects the strongest monthly growth since November 2020.
According to the US Bureau of Labor Statistics, the country’s producer price index inched up 0.30% m-o-m in July after remaining unchanged in the previous month, a notch higher than the 0.20% increase anticipated by economists.
In July, the increase was driven by a 0.50% rise in prices for final-demand services. Likewise, prices for final-demand goods inched up 0.10%.
On a y-o-y basis, the producer price index rose by 0.80% in July 2023.
Furthermore, excluding foods, energy, and trade services, the US core PPI grew by 0.20% m-o-m in July, following a 0.10% rise in the previous month and line with economists’ estimates. This is the highest increase since a 0.30% rise in February.
On a y-o-y basis, the core PPI surged 2.70% in July.
The positive economic data from both countries is expected to keep the GBP/USD pair range bound in the short term.
The historical price chart indicates that the GBP/USD pair is descending after testing the support at 1.2790. The next major support is anticipated only near 1.2580. Additionally, the currency pair is trading below its 50-day moving average, while the MACD indicator is showing a negative reading. Therefore, we anticipate the GBP/USD pair to remain in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
