The pound gained ground against the greenback yesterday following the release of lower-than-anticipated US inflation data for May. The UK’s GDP data for April also met the market’s expectations. Overall, the GBP/USD pair rallied from a low of 1.2737 to a high of 1.2773 in the past 24 hours.
According to the UK Office for National Statistics, the country’s economy recorded no growth in April following a 0.40% GDP growth in the previous month. The reported figure was in line with economists’ estimates.
Furthermore, the UK’s GDP grew by 0.70% in the three months to April, compared with the three months to January.
The growth was led by a 0.20% rise in services output in April, reflecting the fourth successive monthly increase. Also, services output inched up 0.90% in the three months to April 2024.
In a separate news release, the ONS stated that the country’s construction output declined by 1.40% m-o-m in April to £14.94 billion, reflecting the third successive monthly decrease, following a 0.40% dip in the previous month. The reported figure missed forecasts of a 0.10% increase in April.
Seven out of the nine sectors posted a decrease in April. The decrease was led by a 1.90% m-o-m drop in fresh work in April. In particular, private housing new work and private housing repair and maintenance declined by 4.40% and 2.50%, respectively. Repair and maintenance work recorded a decrease of 0.80% in the same period.
Notably, the UK’s construction output plunged 2.20% in the three months to April 2024. The decrease was led by a 2.80% drop in fresh work in the three months to April. Likewise, the repair and maintenance work fell by 1.40% in the same period. The reported figure reflects the sixth successive decline in the three monthly series.
The ONS also stated that the UK’s industrial production fell by 0.90% m-o-m in April following a 0.20% GDP growth in the previous period, missing forecasts of a 0.10% decline.
The UK’s production output rose by 0.70% in the three months to April 2024, compared with the three months to January 2024.
The decline in the UK’s industrial production was led by a 1.40% m-o-m decrease in manufacturing production in April, missing forecasts of a 0.20% decrease. This compares with a 0.30% rise in March.
As per the US Bureau of Labor Statistics, the country’s consumer price index remained unchanged in May after a 0.30% rise in the prior month, missing forecasts of a 0.10% growth.
The index for shelter inched 0.40% m-o-m in May. Likewise, the index for food grew by 0.10% m-o-m in May. Also, the food away from home index increased 0.40% in the same period. However, the food-at-home index stood unchanged. The energy index declined 2% m-o-m in May. The decrease was led by a 3.60% fall in the gasoline index.
Excluding food and energy, the US core consumer price index inched up 0.20% m-o-m in May, following an increase of 0.30% in the prior month, missing forecasts of a 0.30% rise.
On a y-o-y basis, the US consumer price index rose by 3.30% in May. This follows a 3.40% growth in the previous month. Economists anticipated the US annual inflation to be 3.40% in May.
Excluding the food and energy index, the US core consumer price index rose by 3.40% y-o-y in May. The energy index grew by 3.70% y-o-y in May, while the food index rose by 2.10% in the same period.
The lower-than-anticipated US inflation is expected to keep the GBP/USD pair slightly bearish in the short term.
The historical price chart indicates that the GBP/USD pair is rising after testing the support at 1.2690. The next resistance is anticipated to be only near 1.3160. Additionally, the currency pair is trading above its 50-day moving average, while the stochastics indicator is in the bullish zone. Therefore, we anticipate the GBP/USD pair to remain in an uptrend for the upcoming trading sessions.
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.
