GDP Dips in May… But Less Than Expected

The latest set of UK economic data today was a mixed bag. On the headline GDP reading, the UK economy was seen contracting in May, falling 0.1% against the prior month’s 0.2% reading. However, the dip has largely been attributed to the extra bank holiday in place over the Month to celebrate the King’s coronation. However, the decline was less dramatic than many were looking for given the -0.3% consensus market forecast.

Looking at the breakdown of the data, construction output and manufacturing output both fell less than expected. However, Industrial production saw a steeper decline than forecasted while the overall goods trade balance figure again showed a larger deficit than the market was looking for.

GBP Bid Following Data

In all, the data has been taken as a slight positive given that the overall GDP contraction was less than projected. With high inflation and high rates acting as a major headwind to the UK economy, the prevailing sense is that the economy was rather resilient over that period with some analysts forecasting a rebound higher in June. GBP has been well bid on the back of the data and is benefiting too from the decline in USD which looks set to keep GBPUSD well supported near-term.

Technical Views

GBPUSD

The rally in GBPUSD has seen the pair breaking out above the prior 2023 highs, extending the break above the bull channel. Price is now moving above 1.29992 and with momentum studies bullish, the focus is on a further move higher towards 1.3277 next.