Gbp/usd Drops To Fresh Two-year Low Under 1.2200 On Softer Uk Gdp, Us Ppi Eyed

Gbp/usd Drops To Fresh Two-year Low Under 1.2200 On Softer Uk Gdp, Us Ppi Eyed

  • Trade Ideas
  • Forex
  • 2022, 12 May

Brief:

  • GBP/USD takes offers as British data confirms policymakers’ economic fears.
  • Preliminary readings of UK Q1 2022 GDP eased to 0.8% versus 1.0% forecast, monthly figure turns negative.
  • USD strength on risk-aversion wave also exerts downside pressure.
  • US PPI will be eyed to confirm CPI’s strong print.

GBP/USD takes offers to renew a 24-month low of around 1.2185 following the disappointment from the latest stream of the UK data during early Thursday morning in Europe. In addition to the disappointment from the data, the risk-off mood also drowned the cable pair.

UK’s first readings of the Q1 2022 GDP eased to 0.8% QoQ, below 1.0% forecasts while the monthly negative print of -0.1% for March, versus +0.1% expected and prior, gains major attention and drown the GBP/USD prices. Other than the UK GDP, Industrial Production and Manufacturing Production for March also disappoint the cable traders and add strength to the bearish bias.

Read: Breaking: UK Preliminary GDP expands 0.8% QoQ in Q1 vs. 1.0% expected

It should be noted that the Bank of England (BOE) has recently flagged fears of recession and triggered a broad risk-off mood in its latest meeting. With the monthly negative GDP, the market players may rush towards risk-safety at a faster pace, which in turn could propel the US dollar demand considering the firmer fundamentals compared to the UK.

Other than the economic fears, Brexit woes also weigh on the GBP/USD prices as the European Union (EU) showed readiness to suspend trade deals with the UK if it unilaterally revokes the Northern Ireland Protocol (NIP), per Bloomberg. It’s worth noting that the pro-Europe Sien Finn’s victory in Irish elections recently triggered Brexit woes.

On a broader front, covid woes and softer yields seem to underpin a mixed session, which in turn keep the markets directed towards the US dollar buying, amid hopes of the Fed’s 70 bps rate hike, especially after the strong US inflation.

Hence, GBP/USD is well set for the further ride to the south even if the bears await the US Producer Price Index (PPI) for April, expected 10.7% YoY versus 11.2% prior.

Technical analysis

A clear break of the two-month-old support line, near 1.2200 by the press time, directs GBP/USD towards May 2020 bottom surrounding 1.2075.

Suggestion:

Sell below 1.2255 for 1.2170 and 1.2150

Else

Buy above 1.2255 for 1.2280 and 1.2320

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