The GBP/JPY cross fell more than 1.5% on Thursday as both the main pairs – GBP/USD and USD/JPY were down sharply. As a result, the GBP fell below significant support, likely canceling the long-term uptrend.
UK GDP disappoints
According to data released earlier by the Office for National Statistics, the UK economy declined amid rising prices, following a month of no growth.
GDP decreased by 0.1%, compared to predictions of no change, leaving the economy only 1.2% higher than it was before Covid. A 0.2% reduction in the services sector was the most significant contributor to the monthly drop, according to the report.
The initial estimate of a 0.1% increase in February’s GDP was adjusted down to no growth.
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Growth decreased to 0.8% in the first quarter of the year, compared to 1.3% in the previous quarter and estimates of 1% growth. This was the smallest quarterly increase in a year.
Darren Morgan, ONS director of Economic Statistics, said:
“The UK economy grew for the fourth consecutive quarter and is now clearly above pre-pandemic levels, although growth in the latest three months was the lowest for a year.
US Inflation stabilizes
The spike in energy costs in the aftermath of Russia’s invasion slowed a bit in April, but producer price inflation in the United States remained in double digits.
Factory gate inflation (PPI) declined to 11.0% from 11.5% in March, with monthly price increases slowing to 0.5% from 1.2%. However, the monthly increase was in line with expectations.
However, the core PPI, which includes volatile food and energy costs, showed hints of decreasing pricing trends. Core PPI increased by only 0.4% in April, much below the 0.6% forecast and a significant deceleration from the upwardly revised 1.2% in March.
As a result, the USD remained broadly higher, with the USD/JPY pair excluded.
Since the price has dropped below previous highs of 157.80, which was critical support, the medium-term outlook has now changed to bearish. The next target is expected at the 200-day moving average near 155 (the green line).
For the short-term bearish pressure to dissipate, the price must climb above 157.80, with the following resistance near 160.00.
Considering the downbeat mood in the global markets, the bearish trend could continue in the near future.