Cable Retreats on Weak Borrowing and GDP; Traders Eye Existing Home Sales
Cable is trading lower in the wake of the GDP and government borrowing figures. The only surprise was the jump in borrowing April. After the EURGBP broke out on Wednesday, it has retraced its gains in Thursday. Next up for traders is the US jobless claims and existing homes sales, which if weaker than expected could give the GBPUSD currency pair a boost.
U.K. government borrowing rose sharply in April, to GBP 11.2 billion on an underlying basis from GBP 9.533 billion in April 2013. The data was worse than expected, and has knocked sterling lower, as the interbank and short-term speculative participants had been running a net long position.
U.K. second estimate of Q1 GDP came in unrevised as expected, at 0.8% quarter over quarter and 3.1% y/y. Growth was broad based, with production, construction and services all expanding in quarter over quarter terms. The agriculture, forestry & fishing industry was the only industry to decline, falling by 0.7 % quarter over quarter, correcting after three quarters of growth. Among details, business investment increased 2.7%.
The U.K. May CBI industrial trends survey came in below expectations with the total orders headline balance coming in at zero, up from -1% in April but below the median for +4%. Export orders also declined to a -9% balance, down from -3% in the previous month. The outlook for the coming three months was positive, however, with a net 32% of firms expecting growth. Price expectations moderated to a reading of +4% from +9%.
The GBPUSD retraced most of Wednesday’s gains but failed to take out resistance near 1.70. Support is seen near the 50-day moving average at 1.6745. Momentum is poised to turn positive as the MACD is about to generate a buy signal. This occurs when the spread crosses above the 9-day moving average of the spread.
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