UK data to offer some modest relief?
This morning's UK data was a mixed bag, with headline growth for May coming in at 0.3% as expected. This reverses some of the contraction seen in April, though Q2 is still expected to come in at flat at best - as per BoE forecasts - though market forecasts are still for a 0.1-0.2% contraction.
Industrial and manufacturing production continues to underperform though, with manufacturing in May flat on the month, though industrial production was up 0.9% - even though 1.1% was expected. Construction output was up 1.7% which was a very healthy rebound - median forecasts here were in the 0.9% region.
Trade figures were also a little better than expected, with the overall deficits in from £12.76bln to £11.52bln - forecasts at £12.55bln.
As such, we can expect a little softening in the GBP sell-off, even if this is modestly so, though Cable is still struggling to overcome some initial resistance in the 1.2480 area. Clearly, traders are happy to continue selling rallies given the Brexit backdrop and increased chances of a no deal, though we may see the upside open up a little with the potential for a move on 1.2500 a little later on. As we have noted. 1.2525-30 and 1.2590 are key levels on the upside, and these will guard any move back through 1.2600 in the near term.
For EUR/GBP, the slow grind higher continues with the relentless bid tone catching many off guard. We have now see 0.9000 taken on, though interim resistance at 0.9010-12 has stalled the move for now. Ultimately 0.9055-0.9100 is the key resistance zone to watch here and we may well continue to grind towards this area while there is little fresh news on Brexit.