GBP/USD Resumes Downtrend As UK October GDP Contracts
GBP/USD attempted recovery in late November after the 10-cent dive, but failed at resistance last week and this week the bearish trend is resuming.
After a sharp two-month decline of approximately 10 cents that pushed the British pound below 1.25, the currency staged a significant recovery in the first week of November. This rebound occurred despite recent data releases highlighting the UK economy’s deteriorating condition.
GBP/USD Chart Weekly – The 100 SMA Rejected Buyers
On the weekly timeframe, the GBP/USD formed a doji candlestick as buying momentum stalled near the moving averages, which acted as resistance around the 1.28 level. This pattern suggested a potential bearish reversal, and sellers have since taken control, driving the price lower this week.
While buyers initially had an opportunity to push the pound toward the 1.30 mark, momentum faded, and the bullish reversal failed to materialize. The pound reversed downward ahead of the release of the UK’s October monthly GDP report this morning, which added further weight to the currency’s bearish outlook.
UK GDP Report for October by ONS – 13 December 2024
Monthly GDP
- -0.1% m/m (expected: +0.1%)
- Previous: -0.1%
Sector-Specific Data
- Services Output:
- 0.0% m/m (expected: +0.1%)
- Previous: 0.0%
- Industrial Production:
- -0.6% m/m (expected: +0.3%)
- Previous: -0.5%
- Manufacturing Output:
- -0.6% m/m (expected: +0.2%)
- Previous: -1.0%
- Construction Output:
- -0.4% m/m (expected: +0.3%)
- Previous: +0.1%
Key Takeaways
- GDP Misses Expectations: October’s GDP contracted slightly, falling short of forecasts and starting Q4 on a weak note.
- Stagnant Services Sector: Growth in services, a key driver of the UK economy, was flat, missing expectations for modest expansion.
- Industrial Weakness: Industrial production and manufacturing output both declined sharply, underperforming market forecasts.
- Construction Slump: Construction activity also contracted, reversing a small gain in the prior month.
The poor statistic raises concerns about the UK’s sluggish economic environment. The Bank of England faces significant headwinds as the services sector stagnates and the industrial and construction industries weaken. These tendencies may compel a rethinking of monetary policy, raising the prospect of rate reduction in 2024 as the BOE faces greater economic pressures.
GBP/USD Live Chart
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