Forex
Home›Forex›Major Pairs›Pound faces resistance after May GDP details disappoint
Pound faces resistance after May GDP details disappoint
BBH says services led May growth, but production and construction fell, keeping GBP pressured despite markets pricing 50 bps of BoE tightening over 12 months.
Brown Brothers Harriman analyst Elias Haddad said the British pound has limited upside after UK May GDP slightly beat expectations, but the breakdown of the data was less supportive for GBP. FXStreet cited that May’s growth was driven by a 0.3% rise in services, partially offset by declines of 0.5% in production and 0.8% in construction, with services strength concentrated in professional, scientific and technical activities.
Haddad noted that investors are fully pricing 50 bps of Bank of England tightening over the next 12 months and a 25 bps hike to 4.00% by November, but he argued rate increases in a backdrop of sluggish growth and sticky inflation are not bullish for the currency. He pointed to GBP/USD as facing resistance around 1.3600.
The note also linked GBP consolidation to political relief after investors viewed former frontrunner Ed Miliband as unlikely to become chancellor, with the expectation that he would be the least market-friendly option. FXStreet added that the UK’s real GDP rose 0.1% month over month in May versus a 0% consensus, after -0.1% in April.
Latest closeGBP/USD 1.354 ▲1.4%