GOLDWELL：GBPUSD Pound remains unchanged despite rebound of the British GDP

The British pound remained unchanged on the forex market in the wake of the expected 4.8% rebound in British GDP in the second quarter.

Thanks to the lifting of most health restrictions, household consumption (+7.3% vs. -4.6% in Q1) was the main driver of the rebound in economic activity, along with government spending (+6.1% vs. +1.5%).

Conversely, fixed investment (-0.5% vs. -1.7%) continued to contract and foreign trade made a negative contribution to GDP, with imports increasing more than exports.

From a sectoral perspective, the main contributors to the increase were wholesale and retail trade, accommodation and food services, and education.

Despite this significant rebound in UK GDP, the UK economy is still 4.4% below its pre-crisis level, compared with 2.9% for the eurozone. However, the UK economy is expected to return to its pre-crisis level by the end of the year but will still lag behind what it would have been had the pandemic not occurred.

From a technical perspective, the outlook for the GBPUSD is mixed. While the underlying trend is still up, the GBPUSD has done nothing since the beginning of the year and the downward pressure seems to be building, as evidenced by the July low and high, which is lower than the spring low.

The pair has firmly crossed below its 20- and 13-day moving average which also illustrates the loss of momentum for buyers. In addition, the two longer-term moving averages (50- and 200- days) are about to cross, whereas their gap was very large at the beginning of the year.

(Chart Source: Tradingview 12.08.2021)

The outlook is becoming increasingly bearish and would be confirmed if the GBPUSD were to break out of the range it has been in since the beginning of the year. A drop below $1.37 would pave the way for a bearish reversal. On the other hand from a fundamental perspective, the outlook remains bullish but it will probably be best to wait for bullish signals before repositioning to buy. A breach of the symbolic $1.40 threshold would be an initial bullish technical signal.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.