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GBP/USD rises after a jump in Q1 GDP

• UK GDP rose 0.2% MoM & 0.7% QoQ
• Strong growth is expected to be temporary
• USD falls on concerns of Trump looking to devalue the USD
• GBP/USD consolidates below 1.33

The pound is extending gains against the US dollar, showing the UK economy grew faster than expected in March. Data showed GDP grew 0.2% MoM in March ahead of the 0% forecast.

Across the first quarter of the year, the economy accelerated 0.7%, up sharply from 0.1% in the last three months of 2024. This was ahead of the 0.6% forecast and expected by the Bank of England.

However, last week, the BoE said it expected the strong growth in the January to March period to be temporary, and a GDP of 1% is likely across the year.

Trade tariffs are expected to slow the global economy, and British businesses are also concerned about the big hike in employment taxes, which came into effect in April.

Meanwhile, the US dollar is under pressure due to renewed speculation that Trump could seek agreements with other countries to devalue the dollar as part of trade deals.

News that the US and South Korea discussed exchange rate policies has raised a few alarm bells. Should Trump engineer a weaker dollar through deals with trading partners, the Fed is unlikely to cut rates, given the prospect of higher imports.

Attention is now turning to US retail sales, jobless claims, PPI data, as well as the speech by Federal Reserve chair Jerome Powell, which could provide further insight into the Fed's outlook for rates.       
    

GBP/USD forecast – technical analysis

GBP/USD has eased back from its 1.3445 high and continues consolidating below 1.33 as momentum fades.

A breakout trade will look to break out above 1.33 to bring 1.3360, the weekly high, into focus ahead of 1.34.

On the downside, a break below the 1.32 support zone and 1.3175, the weekly low opens the door to 1.31.

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USD/JPY falls ahead of US data dump & Fed Powell’s speech

• USD falls on speculation of Washington seeking a weaker USD
• US retail sales, jobless claims & PPI data is due
• JPY rises on hawkish BoJ expectations
• USD/JPY tests 146.00

USD/JPY is falling lower for a third day amid USD weakness, fueling speculation that the Trump administration is seeking a weaker USD ahead of a data dump.

Reports of currency discussions between the US and South Korea have sparked speculation surrounding Washington's desire for a weaker USD.

The US dollar fell earlier in the week following cooler-than-expected inflation data. However, the Federal Reserve is not expected to move on rates anytime soon, given that it wants to see the impact of Trump's tariffs on economic data before making decisions.

Today, the release of US retail sales and PPI inflation will provide some clues about the health of the consumer and the wholesale inflationary position. Expectations are for US retail sales to be flat at 0% in April after rising 1.5% in March. Meanwhile PPI is expected to rise 0.2% after falling 0.4% in March.

Federal Reserve chair Jerome Powell is also expected to give a speech and could reiterate the central bank's position that there is a new rush to cut rates again until there is more clarity over the impact of Trump's tariffs on the economy.

Meanwhile, the yen is strengthening and could rise further on hawkish BOJ expectations. Day traders this week showed that wholesale inflation showed companies continuing to pass on costs to consumers, adding fears of more entrenched price increases in Japan. This could keep the central bank on track to lift interest rates further, which is underpinning the yen.

Attention will turn to Japanese GDP later, which is expected to show a contraction of -0.1% QoQ in Q1.  
 

USD/JPY forecast- technical analysis

USD/JPY recovered from the 140.00 low, rising from its falling channel before running into resistance at 148.65 and correcting lower. The recovery appears to have run out of steam with sellers are testing support at 146, with a break below here opening the door to 145.00 round number and 143.50.

Should the 146 hold buyers will look to rise above resistance at 148.65 to expose the 200 SMA at 149.60. 

(Click on image to enlarge)

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