GBP drops back as April GDP falls 0.4%, manufacturing also falls
This morning's release of UK data shows GDP fell 0.4% in April, lower than the -0.1% expected. Manufacturing had a major impact, though this was down to the shutdown in car production, which was already scheduled due to the March 29 exit date of the EU. The market may look past these numbers, but GBP has taken a hit on the numbers and is likely to underperform through the day in the absence of any other meaningful numbers.
Manufacturing production fell 0.8%, with industrial production down 2.7% as a whole. Construction output also fell by 0.4%, and here, the market was looking for a 0.6% rise.
One piece of positive data was the trade balance, with the deficit coming in at -£12.11bln vs -£13.1bln expected - this was an improvement from the -£15.4bln deficit seen in March.
Nevertheless, GBP is an easy target these days, with the Brexit backdrop providing validation for sellers to step in at any time. Cable did well to test above 1.2750 last week, but this was all too short-lived and we are now testing back under 1.2700 with a view to testing stronger support levels in the 1.2670-50 region.
EUR/GBP also rejected a move above 0.8900 but is again testing above the figure. Here we see a strong band of resistance in the 0.8910-40 area, which does not seem to be deterring buyers despite weak growth in the Eurozone also!