- Data from the UK confirms policymakers’ economic fears, pushing the GBP/USD lower.
- The UK GDP for Q1 2022 fell to 0.8% vs 1.0% forecast, with the monthly indicator turning negative.
- The strength of the US dollar on the risk aversion wave is also exerting downward pressure.
After disappointing UK data early Thursday morning in Europe, the GBP/USD price is being offered to hit 24-month lows near 1.2185. A risk-averse mood and data frustration also afflict the cable pair.
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GBP/USD prices are drowning after UK GDP opening figures for Q1 2022 fell to 0.8% q/q, 1.0% below forecast, while a negative monthly report of -0.1% in March, as opposed to +0.1%, initially expected, is attracting a lot of attention. Moreover, the UK GDP for March and industrial and manufacturing production disappoint cable traders, contributing to the bearish mood.
The Bank of England (BOE) recently raised concerns about a recession and prompted broader risk sentiment at its last meeting. A monthly negative GDP could spur market participants to switch to risk protection more quickly, which would fuel demand for the US dollar, which has stronger fundamentals than the UK.
In addition to economic worries, Brexit concerns are also weighing on the GBP/USD, Bloomberg reports, as the European Union (EU) has indicated willingness to suspend trade deals with the UK if it unilaterally withdraws from the Northern Ireland Protocol (NIP). Furthermore, the recent victory of pro-European Sien Finn in Ireland’s election has exacerbated the Brexit issue.
What’s next to watch?
Markets are buying the US dollar due to concerns about the Coronavirus and lower yields, which is pushing them to wait for a 70-basis point rate hike from the Fed after strong inflation in the US.
Therefore, the GBP/USD is likely to decline further, even as the bears await the US Producer Price Index (PPI), which is expected to be 10.7% y/y instead of 11.2%.
GBP/USD price technical analysis: Bears eying 1.2000
The GBP/USD pair remains strongly bearish on the 4-hour chart. A strong down bar with high volume broke the 1.2300 level and triggered a sell-off. Now the pair has broken the 1.2200 level as well. The next target is 1.2000 psychological support.
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The key moving averages on the chart are lying well above the price, indicating strong bearish momentum. There is no hope for the buyers unless we see a pause in the trend and consolidation followed by a breakout.
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