GBP/USD slips below 1.2700 handle, fresh session lows post-UK data
- The UK economy contracts for the second straight month in April.
- Manufacturing & industrial production also records steep declines.
- UK political and Brexit uncertainties further add to the selling bias.
The GBP/USD pair held on to its weaker tone through the early European session on Monday, with bears now eyeing a follow-through weakness below the 1.2700 handle post-UK releases.
Having failed to capitalize on Friday's move beyond mid-1.2700s, the pair met with some fresh supply at the start of a new trading week amid a goodish pickup in the US Dollar demand. The US President Donald Trump's announcement to suspend plans to impose tariffs on Mexico helped ease the recent USD bearish pressure and exerted some fresh downward pressure on the major.
On the other hand, the British Pound remained on the defensive on the back of persistent UK political and Brexit uncertainties. The already weaker sentiment surrounding the Sterling deteriorated further following the release of weaker-than-expected UK macro data. In fact, the UK economy contracted 0.4% in April, while manufacturing and industrial production also recorded steep declines on a monthly and yearly basis.
Meanwhile, a slight improvement in the UK trade balance figures, showing that trade deficit shrank more than expected to £12.113 billion in April as against £15.430 billion in the previous month, turned out to be the only factor that helped limit further downside, at least for the time being.
Moving ahead, the US economic docket features the only second-tier release of JOLTS job openings data and seems unlikely to provide any meaningful impetus, though the incoming UK political or Brexit headlines might infuse a fresh bout of volatility across the GBP pairs.
Technical levels to watch