GBP/USD vanquished gains following UK GDP

The pound erased earlier gains against the US dollar on trading Thursday, following a report to show preliminary value of the British GDP rising in consonance with projections during the second quarter of the year.

GBP/USD took a slide from a session high at 1.5384, recorded at 8:00 GMT, to trade at 1.5308 at 9:13 GMT, dipping by 0.06% for the day. Support was likely to be received at July 24th low, 1.5288, while resistance was to be met at July 23rd high, 1.5391.

Earlier on Thursday the Office for National Statistics reported that British Gross Domestic Product accelerated during Q2 compared to Q1 by 0.6%, matching preliminary estimates, after economy expanded by 0.3% in the first three months of the year. All sectors have registered improved results for the first time in three years, giving strength to expectations that the stable rate of increase may continue. In annual terms, UK economy expanded by 1.4% during the second quarter, also meeting expectations, as this was the greatest rate shown since the beginning of 2011. Despite this fact, growth rate remained still 3.3% below the peak, registered during the first quarter of 2008. The sector of services was the main driving force behind growth during the second three months of 2013, contributing to almost 78% of the whole economic growth. Growth results in the first and the second quarter of 2013 mark the first back-to-back periods of growth since 2011. The released report today is an advance estimate and is based on about 44% of the data that will ultimately become available for the quarter.

Additionally, it became clear that the Index of Services in the United Kingdom improved by 0.6% during the three months until May on a quarterly basis, marking the strongest increase since Q3 2012. The sector of manufacturing advanced 0.4% during the same period, while construction sector grew by 0.9%.

“Evidence is building that the economy is gradually getting back on its feet,” said Vicky Redwood, an economist at Capital Economics Ltd. in London, cited by Bloomberg. “The firmer signs of recovery make it all the more important that the MPC reassures the markets that interest rates will stay low even as the recovery gathers further momentum. So the committee is still likely to implement forward guidance at its next meeting.”

Meanwhile, the greenback demonstrated solid positions against its major peers, following Wednesdays report on new home sales in the United States, which rose to a five-year high during June. This may raise the probability of the Federal Reserve Bank tapering its bond purchases by this years end.

Elsewhere, the sterling was trading slightly higher against the euro, as EUR/GBP cross dipped by 0.03% to 0.8618 at 9:46 GMT. In addition, GBP/JPY pair tumbled by 0.50% to trade at 152.81 at 9:49 GMT.