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10/07/24
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GBP Higher Ahead Of GDP
On Wednesday, the British pound showed substantial gains after 2 days of limited movement. GBP/USD traded at 1.2839, up 0.41% for the day in the North American session.
The UK economy has been slow in recovering from the coronavirus pandemic. Growth has been slow, and the economy experienced a shallow recession in the second half of last year. The manufacturing and services sectors are only showing slight growth.
There are, however, indications that the economy is improving. March GDP rose 0.7% y/y and in April by 0.6%. May GDP, due to be released on Thursday, will likely jump 1.2%. If the GDP reading is as expected, it would show that economic growth is improving.
The BoE would like to provide relief to businesses and households who are battling under interest rates of 5.25%. The central bank has kept the cash rate unchanged for 7 consecutive times and will meet again on Aug. 1.
The BoE must see inflation staying near 2% and weak economic data before the meeting will likely lead to the rate-cutting cycle starting. If the GDP reading for May shows strong gains, it may delay plans to cut rates.
Fed Chair Powell will conclude 2 days of testimony before lawmakers. Powell reiterated yesterday that he wouldn’t give any indications about the Fed’s rate path.
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