The United Kingdom's Gross Domestic Product (GDP) grew by 0.1% month-on-month in May, matching market expectations and reversing the 0.1% decline seen in April, according to data from the Office for National Statistics (ONS) released on Thursday [1]. Alongside the GDP figures, monthly Industrial Production fell by 0.5% in May, while Manufacturing Production edged up by 0.1% [1].
Following the data release, the Pound Sterling remained weak, with the GBP/USD pair trading down 0.06% on the day at 1.3531 [1]. However, technical analysis indicates that GBP/USD maintains a constructive uptrend above the 1.3500 level, trading around 1.3535 during early European hours on Thursday [2]. The pair is positioned above both the 100-day simple moving average and the 20-day Bollinger middle band, reinforcing a bullish near-term bias. The Relative Strength Index (14) stands at about 65, suggesting firm bullish momentum, though edging toward overbought territory [2].
Market participants are increasingly betting on rate hikes from the Bank of England (BoE) this year, influenced by expectations that higher oil prices will impact inflation. Money markets are fully pricing in a rate hike by the November policy meeting, with a second hike anticipated by April 2027, according to Reuters [2]. This marks a shift from earlier expectations, when traders had forecast two BoE rate cuts this year prior to the US-Iran war [2].
Immediate technical support for GBP/USD is seen at the 100-day SMA at 1.3400, with deeper support at the Bollinger middle band at 1.3325. On the upside, resistance is noted at the May 8 high of 1.3637, with further gains potentially targeting the 1.3700 psychological level [2].
CONCLUSION
UK GDP growth in May met expectations, but the Pound Sterling showed only mild losses, holding above the 1.3500 level. Market sentiment is moderately positive, supported by technical strength and rising expectations of Bank of England rate hikes later this year. The outlook for GBP/USD remains constructive, with key support and resistance levels in focus.