GBP/USD Fights for Breathe Close to Lowest Point Since Last Year May, Maintains Red Under 1.2200
Sixth Day of Downtrend
The GBP/USD currency pair has managed to recover a few points from a low point of two years. It was seen trading right under the 1.2200 line where it was down by almost 0.50% on the day. The pair prolonged rejection decline that occurred overnight from the 1.2400 line and it saw a heavy follow-up sales on Thursday when it became the sixth straight day of negative movement.
GBP/USD price chart. Source TradingView
The British Pound was heavily affected after the publication of the United Kingdom’s macro report which came in weak. In conjunction with the continuous purchase of the US Dollar, more pressure was put on the GBP/USD currency pair. The preliminary reading of the UK’s Gross Domestic Product revealed that the country’s economy grew by just 0.8% throughout the first quarter of this year compared to the 1.3% that was reported in the last quarter of 2021.
In addition, the reported Gross Domestic Product equally did not meet up to the market’s speculations and revealed that the economy shrank by up to 0.1% in the month of March.
In other matters, the British national statistics office released a report that Manufacturing and Industrial production reduced by 0.2% in the month of March. Both of them did not meet up to their expectations of them. Importantly, the United Kingdom’s trade balance report revealed that deficits unexpectedly moved higher to £23.897 billion in the month of March against £21.619 billion on record for February.
The report confirms the poor economic perspective of the Bank of England as well as of the National Institute of Economic and Social Research. Both bodies have warned that the UK is about to go into a technical recession. This, then, suggests that the present interest rate increase might be getting close to a halt and pulling the Pound down on all fronts.
Meanwhile, the US Dollar extended its latest bullish run and jumped to its highest point since December of 2002. It confirms expectations that there would be a more aggressive monetary policy implementation by the Federal Reserve. The consumer price index released on Wednesday confirmed the market’s speculations that the Federal Reserve would raise interest rates by at least 50 basis points at its next meetings.
The possibility of a fast interest rate increase in the United States, as well as the situation going on in the supply chain industry due to China’s policy to fight COVID and the war in Ukraine all, create concerns over a possible recession. They all also took their toll on the risk sentiment.