Market Analysis

The British Pound (GBP) is trading around 1.2750 against the US Dollar (USD) in Wednesday's London session, showing limited reaction to the UK's April Gross Domestic Product (GDP) and Industrial Production data. According to the UK Office for National Statistics (ONS), the economy remained stagnant as anticipated, indicating a subdued beginning to the second quarter.

April saw a mixed performance with mild growth in the services sector offset by declines in Industrial Production and construction output. Manufacturing output particularly contracted more sharply than expected, driven by reductions in pharmaceutical and food sector production.

Industrial Production and Manufacturing Output figures both declined more than forecasted for April, with Manufacturing Production dropping by 1.4% against an expected 0.2% decrease, and Industrial Production falling by 0.9% versus an anticipated 0.1% decline.

The weak manufacturing data highlights challenges for households and businesses coping with elevated Bank of England (BoE) interest rates, potentially prompting earlier monetary policy easing by the central bank.

However, contrasting indicators may temper calls for rate cuts, notably robust UK wage growth. Wages rose by a notable 6.0% in the three months to April, surpassing levels needed for inflation to stabilize at the BoE's 2% target rate.

Technical analysis reveals the Pound Sterling's cautious recovery from recent lows near 1.2690 against the USD. The GBP/USD pair finds support near the 20-day Exponential Moving Average (EMA) at approximately 1.2714, with the 50-day EMA indicating a positive near-term trend.

Key Fibonacci retracement support rests at 1.2665, marking the 61.8% level from the March high to April low. The 14-period Relative Strength Index (RSI) suggests weakening momentum, fluctuating within the 40.00-60.00 range.

Paraphrasing text from "FX Street" all rights reserved by the original author.