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British Pound (GBP) Forecast: UK GDP Paints Supportive Picture, GBP Bid


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British Pound (GBP) Forecast: UK GDP Paints Supportive Picture, GBP Bid

Jul 13, 2022 | DailyFX
Warren Venketas, Analyst

POUND STERLING TALKING POINTS

  • Strong UK GDP supports GBP.
  • Political uncertainty takes a back seat for now.
  • Bullish divergence on daily cable chart.

GBP/USD FUNDAMENTAL BACKDROP

The pound shook off yesterday’s push lower after better than expected GDP data was released this morning (see economic calendar below). Industrial and manufacturing production for May added to the positive sentiments around the UK economy temporarily leaving the political shenanigans aside. Currently, money markets are pricing in a 66% chance of a 50bps rate hike in August by the Bank of England (BoE) and with the recent GDP data looks to be cementing its place come August. The dovish re-pricing has hurt the pound of recent but we could be seeing a potential turnaround as the dollar hits extreme levels.

Focus now shifts to U.S. inflation later today which may trigger a pullback by GBP bulls should actual data fall short of expectations.

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