GBP/USD rangebound as UK lockdown fears dampen the mood
- The GBP/USD pair is rangebound after the strong UK GDP data.
- The UK manufacturing, industrial, and construction production disappointed.
- The pair is on track to end the week unchanged.
The GBP/USD retreated slightly on Friday after the latest UK GDP data and the latest manufacturing and industrial production numbers. The pair fell to 1.4161, meaning that it is relatively unchanged for the week.
UK GDP data
The UK economy continued to recover in April as many sectors of the economy continued to reopen. According to the ONS, the economy expanded by 2.3% in April, better than the median estimate of 2.2%. This was the fastest growth since the summer of 2020 and was mostly driven by the services sector. Still, the economy remains 3.7% lower than where it was before the pandemic.
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Still, the UK manufacturing, industrial, and construction output disappointed in April. The ONS said that the manufacturing production declined by 0.3% in April after rising by 2.1% in the previous month. This decline was below the median estimate of 1.5%. In the same period, industrial production declined by 1.3% while construction production fell by 2%.
This performance was mostly because of the supply issues that are going on the global economy and the rising commodity prices. Meanwhile, the country’s trade deficit narrowed from more than 11.7 billion pounds to 10.9 billion pounds in April.
The GBP/USD is wavering in part because there is a possibility that the government will delay the reopening process as the number of coronavirus cases in England rises. If this happens, it means that the ongoing recovery will be interrupted and push the Bank of England (BOE) to start being dovish.
The GBP to USD pair is also in a tight range following the latest US inflation data. The numbers revealed that the US headline consumer price index rose to 5% in May while the core CPI rose to 3.7%. As such, traders are still waiting for what the Fed will do in the coming meetings.
GBP/USD technical analysis
The four-hour chart shows that the GBP/USD pair has been in a narrow range in the past few sessions. It is between the support and resistance levels at 1.4097 and 1.4215, respectively. At the same time, the pair remains at the same level as the 25-day and 50-day weighted moving averages (WMA). It is also inside the Ichimoku cloud. Therefore, in the near term, the pair will likely remain in the current range as investors wait for a catalyst.