The British economy expanded at a weaker-than-initially-expected pace in the three-month period to March, official figures revealed on Thursday. The Office for National Statistics reported that the economy grew at a seasonally adjusted quarterly pace of 0.2% in the first quarter, the slowest pace of growth since the beginning of 2016, compared to an originally reported 0.3% expansion pace. Meanwhile, market analysts expected the March quarter's pace to remain unchanged. A fall in the services sector contributed the most to the following slowdown, with retail and accommodation posting the largest drops amid the post-Brexit vote sharp fall in the value of the British Pound.
Furthermore, household consumption rose just 0.3% quarter-over-quarter in the Q1, the weakest since the Q4 of 2014, as inflationary pressures boosted import prices. Household consumption account for about 70% of Britain's GDP growth. The final GDP estimate for the Q1 will be released next month. Thus, the reading could be revised higher or lower. However, it was the first time in four years that the second estimate was revised down.
Upcoming events: US GDP and Durable Goods Orders
GBP/USD to retest trends' supports
Yesterday, once again the Cable remained relatively unchanged, experiencing a small decline, which caused the consolidation trend to be preserved for another day. Risks are still skewed to the downside, but with the GBP/USD pair having a strong support at 1.2850, formed by the lower Bollinger band, the consolidation trend's lower boundary and the broadening rising wedge's support line. Losses are unlikely to exceed this area, although volatility lower is quite possible. Meanwhile, technical studies are unable to confirm either scenario, as they retain mixed signals.
Daily chart
Hourly chart
Bearish sentiment still prevails
Market sentiment remains relatively neutral, as 52% of all open positions are short and the remaining 48% are short. At the same time, the share of buy orders inched slightly up, namely from 52 to 53%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 58% of traders now being short and the other 42% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
By the end of the next three months traders believe the Cable is to rise above the 1.30 major level, as 58% of survey participants share this belief. While the current price is around 1.30, the average forecast for August 26 is 1.3036. The 1.34-1.36 range is now the most popular price interval, having 21% of the votes, while on the second place are the 1.20-1.22 interval, with 15% of the voters choosing it.