The British pound is in positive territory on Thursday. In European session, GBP/USD is trading at 1.3287, up 0.23% on the day.
UK GDP gives the pound a boost
The British economy expanded 0.7% q/q in the first quarter, below the 1% gain in Q4 2024 but just above the market estimate of 0.6%. This marked the strongest growth in three quarters, driven by stronger activity in services and manufacturing. Annually, growth rose 1.3% in Q1, below the 1.5% gain in Q4 2024 but higher than the market estimate of 1.2%.
The Bank of England lowered the cash rate to 4.25% from 4.5% last week and signaled that further cuts were coming. However, the stronger-than-expected GDP reports has lowered the markets’ rate expectations.
The US tariffs have created a lot of uncertainty over global trade. President Trump’s unexpected trade deal with the UK and the deal with China to slash tariffs for 90 days are welcome steps but have reinforced Trump’s unpredictability. This has made it difficult for the BoE to make growth and inflation projections, as the tariff factor remains a huge question mark.
US retail sales ease, PPI declines
US retail sales in April posted a weak gain of 0.1% m/m. This was well below the upwardly revised 1.7% gain in March but edged above the market estimate of 0%. There was also soft data from the inflation front. Producer Price inflation declined 0.5% in April, down from the upwardly revised 0% in March and below the market estimate of 0.2%.
The Federal Reserve is widely expected to hold rates at the June 30 meeting, but there is a 36% chance of a rate cut in July and a 50% likelihood in September, according to CME’s FedWatch. Fed Chair Powell has adopted a wait-and-see stance, hoping that the uncertainty over US trade policy becomes clearer.
GBP/USD Technical
- GBP/USD is testing resistance at 1.3292. Next, there is resistance at 1.3331
- 1.3225 and 1.3186 are the next support levels
GBPUSD 1-Day Chart, May 15, 2025
