- Summary:
- The GBPUSD pair retreated as the UK released some of the worst economic numbers on record. The data showed that the economy crashed due to Brexit issues
The GBPUSD pair declined slightly after the Office of National Statistics (ONS) released some of the worst economic numbers on record.
GBPUSD drops as UK economy weakens
The Office of National Statistics (ONS) did not have any good news for the UK. The office released incredibly weak numbers, sending a signal of how worse the UK economy performed. According to the office, the economy contracted by 20.4% in April, a month which more people were stuck at home. The economy dropped by 24% year on year.
The construction, industrial production, and manufacturing sectors also crashed. The three sectors dropped by a monthly rate of 43.6%, 20.3%, and 24.3% respectively. On a year on year basis, the three sectors contracted by 44%, 24.4%, and 28.5% respectively.
These numbers show how hard the economy was affected by the lockdowns. On a positive side, the country has started to reopen, which means that some of these numbers could start improving. However, the outlook is still cloudy because of the rising number of companies that are reporting fresh layoffs. Just yesterday, companies like John Matthey, Centrica, and Nissan announced almost 9,000 job cuts.
GBP/USD focuses on Brexit
The GBPUSD pair is also focused on Brexit issues. Yesterday, the chief UK negotiator said that the UK would leave the European Union on December 31st. By that, he ruled out the fact that Boris Johnson will ask for an extension to the Article 50. He also said that the UK would refuse if the EU negotiator asks for an extension.
I am also retweeting the message I posted in April on the Government’s policy on the transition period, which remains valid. https://t.co/6hSwldWWl2
— David Frost (@DavidGHFrost) June 11, 2020
All this leaves the UK in a precarious position. The economy is ailing and there is no chance that the country will have a deal. This is important because the UK exports more than 45% of all its goods to the EU. On the other hand, the EU only ships about 4% of its goods to the UK.
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GBPUSD technical outlook
On the daily chart, the GBPUSD pair is trading at 1.2578. This price is between the 50% and 38.2% Fibonacci retracement. It is also slightly above the 50-day and 100-day exponential moving average. It has also formed an evening star pattern, which is usually a bearish sign. This means that there is a possibility that the price will continue falling as bears attempt to test the 50% retracement at 1.2468.
On the flip side, a close above this week’s high of 1.2812 will signal that there are more buyers in the market.