UK GDP and Manufacturing Reports Likely to Weigh Further on GBP, Rather than Help
The UK GDP and manufacturing report will be released soon, but the risk for the GBP is on the downside
The GBP has been on a major bullish trend for the last three years since the Brexit vote took place in June 2016. The UK economy has been affected greatly by this and the GBP has felt the weight. Although, during the previous couple of months, we saw some decent economic figures from Britain which gave a false impression that the British economy was reviving.
But, that was just a mirage because British firms were stocking up ahead of a disruptive Brexit, which is where the UK is heading, considering the political turmoil. In the last several weeks, the economic data has turned out to be pretty negative again, so the idea that the positive figures of the previous months were just a hiccup due to stockpiling, has become a reality now.
As a result, the GBP has turned bearish again and GBP/USD pushed below the major support level at 1.25 yesterday. Today we have the GDP report as well as the manufacturing one for May, which will be released soon. The GDP contracted by 0.1% in March and by 0.4% in April, while manufacturing posted a massive 3.9% decline in April. Today’s reports are expected to show a 2.2% increase in manufacturing and a 0.3% increase in the GDP.
But, even if the numbers come as expected or even better, they won’t change the fate of the GBP. Brexit is headed for a noßdeal outcome while the economy is weakening and it will likely follow the fate of the Eurozone economy which is heading into stagnation. So, the risk is to the downside for the GDP when these two reports get released. If the numbers come positive, then we might see a short-lived climb, which would offer a good opportunity to go short on GBP/USD. If the numbers come negative, then the downtrend will stretch further, so it’s a win/win situation for GBP sellers.
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