The pound dips on the headline but then recovers in the minutes after
Of note, cable fell from close to 1.3050 to a low of 1.3035 on the back of the data release but has not recovered to 1.3070 at time of writing. So, what gives?
No doubt that the report was a softer one with the headline estimate seeing a downwards revision from +1.3% y/y to +1.2% y/y. This comes as business investment and government spending were revised much lower relative to initial estimates. Then, Q1 figures were also revised lower to add insult to injury.
But given the context of those drops, the minor dip doesn’t mean much and it still continues to highlight an improvement to Q1. Market expectation is for a more optimistic Q3 growth in the UK, and that’s one of the reasons I can point towards as to why sterling recovered from its lows earlier.
Apart from that, buyers are still finding near-term support from the swing region just above 1.3050 as the hourly candle still hasn’t closed below that in the last two weeks. The last time the pair tested the level was last Friday and price hung on to the support level there. So, for now that remains a key support level in limiting losses in cable.