Despite the weaker-than-expected U.K. Gross Domestic Product (GDP) report, GBP/USD continues to carve higher highs & lows as the bullish RSI momentum gathers pace. The pound dipped firstly against the dollar yesterday after data showed that U.K. economic growth slowed more sharply than expected in the first three months of the year. However, the pair then retreated from the temporary fall, increased 0.73% by the end of the trading day. This morning, we saw further Sterling gain against the dollar, hitting highs of 1.5384, the most since March 2. The Office of National Statistics said gross domestic product expanded 0.3% in the three months to March, slowing from 0.6% in the final quarter of 2014. It was the slowest rate of growth since the fourth quarter of 2012. The consensus forecast among economists was for a more moderate slowdown to 0.5%. On a year-over-year basis the U.K. economy grew 2.4%, below expectations for 2.6% after growth of 3.0% in the last three months of 2014. Growth in Britain’s dominant services sector slowed to 0.5% from 0.9% in the previous quarter the ONS said, led lower by the slowest growth in business services and finance since late 2010. Industrial output dipped 0.1% and construction output contracted by 1.6%. GBP/EUR reached the 1.40 key level once again this morning.
The euro rose to three-week highs against the broadly weaker dollar yesterday as data showing that U.S. consumer confidence deteriorated last month added to concerns that the economic recovery is losing momentum. EUR/USD was last at 1.0991, the most since April 6, 0.77% higher for the day. Demand for the euro continued to be underpinned amid optimism that Greece is moving closer to reaching an agreement with its creditors on a package of economic reforms for bailout funds. Greek Prime Minister Alexis Tsipras on Monday reshuffled the team handling talks with the country’s international lenders fuelling hopes that a deal can be reached in time to avert a default.
The dollar turned lower after the Conference Board reported that its consumer confidence index slumped to 95.2 in April, well below the forecast of 102.5 and down from 101.4 in March. Inflation rate expectations were the lowest since February 2007. The report said the deterioration in confidence was due to the recent lacklustre performance of the labour market and apprehension about the short-term outlook. The report came as investors were looking ahead to today’s Federal Reserve rate statement for further indications on the timing of a first rate hike by the central bank. Recent disappointing reports on employment, retail sales and industrial production have prompted investors to scale back expectations for higher interest rates. Earlier yesterday data showed that U.S. home prices rose in February from a year earlier. The S&P/Case-Shiller home price index rose by an annualized 5.0% in February, above forecasts for a reading of 4.7% and following a gain of 4.6% in January.