The US economy expanded at a stronger-than-initially-expected pace in the March quarter; however, an economic slowdown remained on the table in the second quarter. The Commerce Department reported on Friday that Q1 GDP growth came in at a seasonally adjusted annualised pace of 1.2%, compared to an originally reported pace of 0.7%. Meanwhile, analysts expected the economy to expand 0.9% in the reported quarter.
However, that was the worst performance over the past 12 months. Back in the Q4 of 2016, the economy grew 2.1%. Analysts suggested that the Q1 slowdown was mainly driven by the US President Donald Trump's inability to boost economic growth as promised. Even though the Q1 figure was revised up sharply, weak retail sales, business investment, falls in investment inventories and an increase of the goods trade deficit destroyed hopes for a rebound in the Q2. A separate report released by the Commerce Department showed that new orders for US-manufactured durable goods dropped 0.7% last month, whereas orders for core durable goods fell 0.4%.
UK Manufacturing PMI likely to be overshadowed by US data
GBP/USD flirts with 1.29
For the third consecutive day yesterday the British currency was able to avoid losses and outperform the US Dollar, continuously retesting the wedge's support line. The Pound, however, is now expected to allow the Greenback to take the upper hand, which arises the risk of the wedge's lower boundary getting pierced today. Technical studies are still unable to confirm this possibility, meaning that the wedge's support could still succeed in limiting the losses; if not, the cluster around 1.2730 is likely to fulfil that task. We should also not rule out the possibility of another leg up, with the 1.2950 handle expected to be the intraday high.
Daily chart
Hourly chart
Bearish sentiment still prevails
There are 51% of traders holding long positions (previously 52%), but 57% of all pending orders are to buy the Sterling, up from 51%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 58% of all open positions are short and the remaining 42% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 66% of traders now being short and the other 34% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
Traders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 57% of survey participants share this belief. While the current price is around 1.29, the average forecast for September 01 is 1.2968. The 1.34-1.36 range is now the most popular price interval, having 26% of the votes, while on the second place is the 1.20-1.22 interval, with only 19% of the voters choosing it.