The Sterling struggled to post gains against other major currencies on Wednesday, but experienced losses were not as severe, as they were anticipated. The Pound declined the most against the Euro and the Swiss Franc, having edged 0.46% and 0.50%, respectively. Other losses were seen against the Loonie (0.30%), the US Dollar (0.27%), whereas the GBP/JPY edged only 0.13% lower. At the same time, the British currency managed outperform the Kiwi, amid slightly dovish RBNZ statement, whereas a 1.80% gain was registered against the Australian Dollar, which suffered from a poor reading of Australian CPI.
The British economy slowed in the first quarter, hit by an ongoing decline in the industrial sector and concerns that a looming vote on the country's membership of the EU will hurt the economy further. According to the Office for National Statistics, the UK economy expanded 0.4% in the three months through March, following a 0.6% growth in the final quarter of 2015. Measured on an annual basis, Britain's economic output increased 1.6%, down from 2.4%. The slowdown was led by a slump in manufacturing and construction, which offset strong growth in the UK's dominant services sector. Output increased in the services sector by 0.6% in the first quarter, but production dropped by 0.4%, construction output fell 0.9% and agriculture slid 0.1%.
Bank of England officials said that they expect the economy to expand more slowly in the first half of the year than it did in late 2015 as uncertainty over the referendum outcome forces companies to delay hiring and investment. The OECD said that the British economy could be as much as 3% smaller by 2020 if it leaves the EU than if it stayed in. BoE Governor Mark Carney, meanwhile, highlighted a sharp depreciation in Pound's exchange rate versus other currencies should Briton's vote to leave the EU could boost the annual rate of inflation.
US GDP Annualized, US GDP Price Index and Initial Jobless Claims
GBP/USD attempts to prolong bullish trend
The GBP/USD currency pair underwent a small correction on Wednesday, being weakened by the FOMC statement. Nonetheless, the Cable remained above the immediate support area, namely the weekly R1, which keeps the pair elevated even today. The Sterling has the potential to erase yesterday's losses and climb over the 1.46 major level, with the nearest resistance being the Bollinger band, the monthly R1 and the weekly R2 around 1.4620. The medium-term trend has been bullish for almost four weeks now, with the Pound expected to continue edging higher until the resistance line around 1.49 is reached.
Daily chart
Hourly chart
Sentiment at perfect equilibrium
Traders' sentiment shifted to the bearish side today, as 52% of traders are now short the British Pound (previously 47%). The number of buy orders, however, edged up 15% points, having risen up to 60%.
At OANDA market sentiment is close to the equilibrium, with only 52% of their open positions being long, two percentage points less from Tuesday. Meanwhile, the sentiment at SAXO Bank remains bearish, with 59% of their traders holding short positions (previously 61%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months