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Forex Market: GBP/USD set to retest recent one-month lows as British economy contracts the most since 1979 in first quarter

GBP/USD retreated for a fifth straight trading day on Tuesday and was set to retest Monday’s one-month low of 1.2252, after a report by the UK Office for National Statistics showed economy had contracted at the steepest quarterly pace since the third quarter of 1979 in Q1, as non-essential businesses shut down and consumers remained at home due to COVID-19-related lockdown.

British Gross Domestic Product decreased at a quarterly rate of 2.2% during the first quarter of 2020, compared with a preliminary estimate of a 2.0% drop, after recording zero growth in Q4 2019.

Year-on-year, Britain’s economy contracted at a final rate of 1.7% during the first quarter, compared with a preliminary estimate of a 1.6% slump, after expanding 1.1% during the last three months of 2019.

As of 6:39 GMT on Tuesday GBP/USD was edging down 0.21% to trade at 1.2274, after touching an intraday low of 1.2273, or a level not far from Monday’s one-month low. The major pair has retreated 0.51% so far this week, following three successive weeks of losses.

In terms of economic calendar, at 10:00 GMT today Bank of England’s Chief Economist Andrew Haldane is scheduled to discuss a range of economic indicators to consider the impact that Covid-19 has had on the UK and global economies since the start of 2020 during a webinar titled “The Second Quarter”.

At 13:45 GMT ISM-Chicago Inc will report on manufacturing activity in the region. The Chicago Business Barometer probably remained in the contraction area for a tenth straight month in June, according to market expectations, coming in at 45.0. In May, the gauge was reported at 32.3, which has been the lowest reading since March 1982 as business confidence worsened further amid the coronavirus crisis.

Confidence among US consumers probably continued to improve in June, with the corresponding index coming in at 91.8, according to expectations. In May, the gauge was reported at 86.6. The Conference Board research group will release the official data at 14:00 GMT.

At 15:00 GMT Federal Reserve President for New York John Williams is expected to speak at the live-streamed Institute of International Finance “Central Banking in the Age of Covid-19” Summit, while at 16:30 GMT Federal Reserve Chair Jerome Powell and US Treasury Secretary Steven Mnuchin are scheduled to testify before the House of Representatives Financial Services Committee about the coronavirus response.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 24.9 basis points (0.249%) as of 6:15 GMT on Tuesday, up from 24.8 basis points on June 29th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.2314
R1 – 1.2376
R2 – 1.2452
R3 – 1.2514
R4 – 1.2576

S1 – 1.2238
S2 – 1.2176
S3 – 1.2100
S4 – 1.2024 is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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