GBP/USD Rally Stops Short at 1.53


The GBP/USD was reversing early-week gains on Tuesday, falling below the 1.5300 handle despite stronger than expected British trade figures.

The GBP/USD tumbled to an intraday low of 1.5273. The pair would subsequently consolidate at 1.5296, declining 0.3% or 45 pips. The GBP/USD had climbed to a daily high of 1.5375 overnight following a solid recovery on Monday. The technical levels show immediate support at 1.5260, followed by 1.5200. On the upside, the GBP/USD is likely to face resistance at 1.5340 and 1.5360, the 200-day moving average.

In other trading, the pound steadied against the euro, as the EUR/GBP fell 0.3% or 20 pips to 0.7335. The pair has had a volatile five-day period, seeing lows of 0.7267 and highs of 0.7390. The pair faces immediate support at 0.7309 and resistance at 0.7415.

In economic data, the UK trade deficit narrowed more than forecast in April, which bodes well for overall economic growth in the second quarter.

The total trade deficit stood at £1.2 billion in April, down from £3.1 billion in March, the Office for National Statistics reported on Tuesday. The goods trade balance shrank to £8.6 billion from £1.7 billion in March, official data showed. Exports increased by £700 million, mostly on improving trade conditions with countries outside the European Union. Britain’s non-EU trade balance fell to £2.1 billion in April from £3.5 billion the previous month.

UK economic growth slowed to just 0.3% in the first quarter, as the construction sector saw output decrease for the second consecutive quarter. The annual rate of gross domestic product slowed to 2.4% in the first quarter, down from 2.8% in the final three months of 2014.

Despite the slowdown, the UK economy is forecast to grow 2.7% annually in 2015, according to the International Monetary Fund’s revised outlook released in April. That is slightly above the average for advanced economies, which sits at 2.4%. UK GDP growth is expected to then moderate at 2.3% in 2016.

The Bank of England will likely remain on the sidelines until well into next year, allowing more time for accommodative monetary policies to help in the recovery. UK inflation turned negative in April, further reducing the likelihood of a 2015 rate hike. The BOE has held its benchmark interest rate at 0.5% for more than six years.