**FxWirePro: GBP/USD Slides to Two-Month Low as Weak UK GDP Data Fuels Rate Cut Bets**
*Originally reported by FxWirePro/EconoTimes*
The GBP/USD currency pair plunged to its lowest level in two months during the European morning session on Friday. The dramatic move followed the release of weaker-than-expected gross domestic product (GDP) data from the United Kingdom, intensifying speculation that the Bank of England (BoE) will be compelled to cut interest rates sooner than anticipated. The broader macroeconomic environment, comparative central bank expectations, and risk sentiment further complicated the outlook for the British pound against its U.S. counterpart.
—
## Table of Contents
– Overview of Recent GBP/USD Movements
– Analysis of Latest UK GDP Data
– Bank of England Policy Outlook
– Comparative Perspective: U.S. Dollar Dynamics
– Market Reaction and Forward Guidance
– Technical Analysis of GBP/USD
– Implications for Traders and Investors
– Conclusion
—
### Overview of Recent GBP/USD Movements
– The GBP/USD pair dropped below the key 1.2500 psychological level, marking its lowest exchange rate since early April.
– In Friday’s trading session, the pair reached a two-month low around 1.2440-1.2450, with bearish momentum reinforced by macroeconomic disappointments from the UK.
– Investors and traders have been closely watching the pair, as policy divergence between the Bank of England and the Federal Reserve grows more pronounced.
### Analysis of Latest UK GDP Data
– The Office for National Statistics (ONS) released its latest GDP report, revealing that the UK economy stagnated in April 2024.
– The data showed that the UK’s GDP was flat on a month-on-month basis, falling short of the consensus forecast for modest growth.
– Service sector growth continued to disappoint, while industrial production and construction sectors contracted further.
– The disappointing economic performance has amplified concerns about the UK’s ability to sustain its fragile post-pandemic recovery.
**Key GDP data highlights:**
– UK GDP (MoM, Apr): 0.0% (vs. forecast 0.1%, previous 0.4%)
– Industrial Production (MoM, Apr): -0.9% (consensus: -0.4%)
– Construction Output (MoM, Apr): -1.4% (consensus: -0.5%)
– Services (MoM, Apr): 0.1% (no change)
**Sectoral breakdown:**
– Services sector growth stalled, especially customer-facing industries.
– Manufacturing and construction faced sharp contractions.
– Export activity remained muted amid ongoing global economic challenges.
### Bank of England Policy Outlook
The weaker GDP data has intensified market speculation about the BoE’s next policy move.
– Markets now see an increased probability of a rate cut as soon as Q3 2024, ahead of other major central banks.
– Several BoE policymakers have recently signaled concern over economic fragility, even as inflation shows signs of easing.
– Money markets are pricing in nearly two 25 basis point cuts before the end of 2024, with the first move potentially as soon as August.
– The pressure is mounting on the BoE to support growth, particularly as household spending remains constrained and business investment falters.
– While inflation in the UK remains above the BoE’s 2% target, the central bank is balancing price pressures against the risk of a prolonged economic slowdown.
**Bank of England risk factors to monitor:**
– Pace of disinflation versus economic contraction.
– Labor market resilience versus cost-of-living strain.
– Fiscal policy uncertainty ahead of upcoming UK elections.
### Comparative Perspective: U.S. Dollar Dynamics
The U.S. dollar has maintained a position of strength amid the global risk environment and relatively robust U.S. economic data.
– U.S. consumer inflation data, released earlier in the week, came in below expectations, temporarily weighing on the
Read more on GBP/USD trading.