GBP/USD forms bullish flag as UK growth puts pressure on the BOE

The GBP/USD price formed a bullish flag pattern after the relatively strong UK GDP data. It is trading at 1.4133, which is slightly below this week’s high of 1.4165. 

UK economy rebounds

The UK economy has done relatively well this year. In December, the Boris Johnson administration reached an agreement with the EU on a Brexit deal. This helped to prevent the massive disruption of businesses that analysts were expecting.

The government has also ramped up its vaccination process. It has already vaccinated more than 50% of the population and the pace is increasing. This has led to a slower pace of new infections and the gradual reopening of the economy. As a result, many companies, especially in the services sector have started picking up. 

The results of all this were revealed by the Office of National Statistics (ONS), which published the UK GDP data. The numbers showed that the economy rebounded by 2.1% in March, which was better than estimates. In total, the economy declined by 1.5% in the first quarter, better than the expected decline of 1.7%. Still, the economy is 8.3% below its pre-pandemic low. 

The economic recovery in March was spread across most sectors. For example, industrial production rose from 1.0% in February to 1.8% in March. Similarly, manufacturing production rose from 1.3% to 2.1% while the construction output rose from 2.3% to 5.8%.

These numbers are important for the GBP/USD price because they could change the Bank of England policies. Indeed, analysts predict that the BOE will start tapering its asset purchases in the upcoming meeting. By doing so, it will be following the footsteps of the Bank of Canada, which has started cutting its asset purchases. Later today, the pair will react to the latest US consumer inflation data.

GBP/USD technical analysis

The four-hour chart shows that the GBP/USD rose above the important resistance of 1.4000 on Monday this week after the Scottish election. It rose to the highest level since February 25. The price is also above the 25-day and 50-day moving averages. Notably, it has started forming a bullish flag pattern, which is usually a sign of continuation. Therefore, the pair will likely break out higher as bulls start targeting the next resistance at 1.4250, which is 1% above the current price.