The UK GDP report for March and full-Q1 was the only noteworthy European data releases scheduled for today. Report saw daylight at 7:00 am BST and turned out to be a big disappointment. Report showed a 0.8% QoQ expansion in Q1 2022 while the market expected an expansion of 1% QoQ. However, it was March monthly GDP reading that was the biggest disappointment. Monthly reading was expected to show a 0.1% expansion from February levels. Instead, it showed a 0.1% MoM contraction. Note that March was the first full month since the beginning of Russian invasion of Ukraine therefore it could be seen as a potential sign of economic struggles in the months ahead. Bank of England warned that tightening and current geopolitical developments are likely to push the UK economy into recession. Nevertheless, BoE’s Ramsden said today that upside risk to inflation remains in the medium-term and therefore more policy tightening may be needed in the coming months. This, in turn, will magnify pressure on the economy.
GBPUSD moved lower following the release of the UK GDP report. A look at the weekly interval is needed to capture the full scale of a recent drop on the pair. GBPUSD is trading around 10% year-to-date lower and near 2-year lows. The nearest support zone to watch can be found ranging above the 78.6% retracement of the post-pandemic recovery move in the 1.2000 area.