GBP/USD: Here’s why sterling rose after weak UK GDP data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jul 9, 2021
  • The GBP/USD pair rose on Friday after the latest UK GDP data.
  • The economy expanded by 0.3% in May after rising by 2.0% in April.
  • The pair rose because of the overall weak US dollar.

The British pound (GBP/USD) rose slightly on Friday even after the relatively weak UK GDP numbers. The pair rose to 1.3810, which was about 0.56% above the lowest level this week.

UK GDP data

The UK economy recorded a slower economic recovery in May even as the country continued to reopen. According to the Office of National Statistics (ONS), the country’s economy expanded by 0.8% in May, slower recovery than the previous month’s growth of 2.0%. 

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

The monthly economic growth was mostly attributed to the service industry as many companies reopened. These businesses included bars, hotels, restaurants, and others in the hospitality industry. However, UK automakers continued complaining about the ongoing chop shortages. Also, the industrial sector was affected by energy demand.

Additional data by the ONS revealed that the UK industrial production rose by 0.8% in May, lower than the median estimate of 1.5%. The production rose by 20.6% on a year-on-year basis, lower than the expected 21.6%.

Further, the GBP/USD reacted to the latest UK manufacturing production data. According to the ONS, the country’s manufacturing production declined by 0.1%, lower than the median estimate of a 0.1% growth. 

The UK construction output declined by 0.8% in the same period after slipping by another 0.7% in the previous month. Analysts at ING wrote the following about the latest UK GDP data.

“We still expect the UK to record approximately 5% growth through the second quarter. But the outlook for the current third quarter is becoming trickier to predict. Covid-19 cases are rising, albeit the growth rate may finally be showing some tentatively signs of slowing.”

The GBP/USD likely rose because of the overall weak US dollar. The US dollar index has declined by more than 0.15% even as the benchmark US 10-year yield bounced back. The yield rose to 1.345%, higher than yesterday’s low of 1.25%.

GBP/USD technical analysis

GBP/USD
GBP/USD technical chart

The four-hour chart shows that the GBP/USD pair formed a double-bottom pattern at 1.3735. Its neckline is at 1.3895, which was the highest level on Tuesday. The price remains slightly below the 50-day exponential moving average and the descending trendline. Therefore, the pair will likely keep rising as investors target the neckline of the double-bottom pattern. On the flip side, a drop below this week’s low will signal that there are still sellers in the market.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

  1. Etoro, trusted by over 13m users worldwide. Register here >
  2. Capital.com, simple, easy to use and regulated. Register here >