The UK’s activity data for October came in weaker than expected. The monthly Gross Domestic Product (GDP) declined by 0.1%, contrary to the market’s anticipation of a 0.1% increase, as pointed out by Scotiabank’s Chief FX Strategist Shaun Osborne.
GBP’s Broad Weakening Trend
“Manufacturing, construction, and services outputs all turned out to be weaker than forecasted. Additionally, the UK recorded a larger-than-expected trade deficit during that month. However, the Bank of England (BoE)/Ipsos inflation expectations survey showed an increase to 3.0% for the next 12 months, up from 2.7% in October. The British pound weakened across the board due to the soft growth data, which also led to a second-day rally in the EUR/GBP pair.”
“On the short-term chart, Cable (GBP/USD) is stabilizing in the mid-1.26s after sliding during European trading. The pound’s drop out of its trading range around 1.2750 and a likely low close for the week is making the technical outlook somewhat bleaker, especially following its failure to break above the 200-day Moving Average (MA) at 1.2820 last week. A low close this week would suggest that further losses are on the horizon.”
“Meanwhile, the rebound of the EUR/GBP pair from the low 0.82 zone has suddenly put an end to the GBP’s bull run in this currency cross – at least for now. There could be a resurgence of better selling interest as the pair approaches the mid-0.83s.”
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