The British pound (GBP) was seen trading with caution against major currencies in European sessions Thursday, experiencing a slight dip of 0.1% against the US dollar (USD), settling close to 1.3350. This drop comes just ahead of the UK’s monthly gross domestic product (GDP) report for April, which is expected to be released on Friday.
Analysts from the Office for National Statistics (ONS) predict that GDP growth may have contracted by 0.1%, following a 0.3% increase in March. Such a scenario, where the UK economy diminishes despite ongoing inflationary pressures driven by rising energy costs, might dampen expectations for an interest rate hike from the Bank of England (BoE).
Additionally, investors will be looking out for the forthcoming manufacturing and industrial production data for April, which are anticipated to show mixed results. Industrial production could see a month-on-month rise of 0.1% after a 0.2% decrease in April, while manufacturing production might decline by 0.2% during the same timeframe.
On a broader scale, worries surrounding a potential breakdown of the ceasefire between the US and Iran have reduced the appeal of risk currencies, subsequently boosting demand for the safer dollar. In European trading, the US Dollar Index (DXY), which measures the dollar’s value against six major currencies, edged slightly positive to around 100.12 after earlier losses.
There’s some skepticism among investors about the sustainability of the ceasefire, given recent attacks between the two nations. While President Trump has indicated that the US military response was to the downing of an Apache helicopter by Iran and wasn’t a signal of a full-scale war, tensions still remain high, according to reports.
Next week, the British pound is likely to experience significant volatility due to a week filled with critical data releases in the UK, alongside a monetary policy announcement from the Bank of England.
