Market Overview

GBP/USD: A Double-Deadlock In Talks Outweighs An Upbeat Economy

GBP/USD: A Double-Deadlock In Talks Outweighs An Upbeat Economy
  • GBP/USD is pressured around 1.3000 as Brexit and trade talks are going nowhere.
  • After the upbeat UK GDP, the next data point to watch is US inflation.
  • The technical outlook is bearish for the currency pair.

The impasses are beginning to take their toll. The US has imposed new tariffs on China after both sides had failed to clinch a trade deal. While Chinese officials vowed to respond, the delegation representing the world's second-largest economy has not left Washington at the time of writing. Moreover, the new levies will only apply to goods leaving Chinese ports today, not those that are already en route to the US.

Nevertheless, the sour mood is weighing on sentiment and GBP/USD is leaning lower. The pound is also pressured by the ongoing impasse on Brexit as both parties begin focusing their energies on the European elections rather than on reaching a Brexit deal. The thorny topic of the UK's participation in a customs union with remains the sticking point.

While uncertainty is high, the UK economy is doing well. The economy grew at a quarterly pace of 0.5% and at an annual pace of 1.8% in the first quarter of the year. While the figures did not surprise markets, they are upbeat in absolute terms. Moreover, manufacturing output rose by 0.9% against 0.2% expected in March, and industrial production also came out above forecasts. 

However, upbeat economic numbers are not enough amid the brewing storms. 

US inflation is the next economic indicator to watch as developments related to trade are awaited. According to the forex calendar, consumer prices probably accelerate to 2.1% in April on both the headline and the core, confirming the Fed's claim that weak inflation was temporary. Another month of weak data may weigh on the greenback. 

GBP/USD Technical Analysis


GBP/USD suffers from downside Momentum on the four-hour chart and is struggling to hold onto the 200 Simple Moving Average after having lost the 50 and 100 ones. The outlook is worsening. 

The pair was temporarily supported twice at 1.2985 earlier this month. Close by, 1.2960 was the March low and a low point earlier this week. The next line to watch is 1.2920 that held the currency pair down in late April and the two-month low of 1.2870 seen around that time.

Resistance awaits at 1.3035 that was a high point earlier this week. It is followed by 1.3080 that separated ranges this month, and then by 1.3030 that was a swing high beforehand.

Image sourced from Pixabay


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