The GBP/USD declined for a second consecutive day on Friday, as weak economic data further diminished the likelihood the Bank of England would consider raising interest rates after the May 7 general election.
The GBP/USD fell to fresh three-week lows on Friday after Thursday’s heavy losses. The pair bottomed out at 1.4587 in the European session. It would later consolidate at 1.4642, declining 0.45%. The trend index is strongly bearish, with the GBP/USD testing the 1.4635 support level. A break below that level exposes 1.4558. On the upside, initial resistance is likely found at 1.4839.
In other trading, the pound was steady against the euro, as the EUR/GBP traded at 0.7242. The pair traded within a narrow range of 0.7224-0.7268. Initial support is likely found at 0.7226 and resistance at 0.7271.
Sterling lost ground against the Japanese yen, as the GBP/USD plunged 0.79% to 175.93. Near-term support is offered at 1.7589. Initial resistance is likely found at 178.63.
The pound also lost ground against the Swiss franc, as the GBP/CHF fell 0.2% to 1.4352. Initial support is likely found at 1.4349 and resistance at 1.4412.
In economic data, UK factory activity rose less than forecast in February, adding further evidence of a slowing economy. UK manufacturing production rose 0.4% in February, but was up just 1.1% annually, the Office for National Statistics reported on Friday. Economists forecast a 1.3% year-on-year gain.
Industrial production – a broader measure of factory output that includes 13 manufacturing sectors – rose just 0.1% in February. Compared to February 2014, industrial production rose just 0.1%. Economists forecast an annualized gain of 0.4%.
Weak economic data give the Bank of England plenty of scope in maintaining record low interest rates. The BOE left its benchmark interest rate at 0.5% on Thursday, the first time since the Second World War that rates have gone unchanged for the duration of parliament.
The BOE had been considered the front-runner for raising interest rates, but weak domestic inflation and tepid wage growth put a lid on rate speculation. The Bank’s Monetary Policy Committee has voted unanimously to keep interest rates at record lows in each of the last three meetings. MPC members Martin Weale and Ian McCafferty had voted to raise interest rates in the previous five meetings.
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