The dollar is gaining against all of its major counterparts in early trading on Tuesday which has kept GBP/USD well offered in the early day. Sterling is set to post the largest loss among the major currencies for the month of June.
UK GDP declined by a revised 2.2% in the first quarter which is the largest contraction in over 40 years. The deterioration in the economy is attributed to the Coronavirus outbreak and the subsequent lockdown restrictions to contain it.
The Office for National Statistics (ONS) published a report earlier this month which showed a 10.4% decline in GDP for the three months to April.
At it’s June monetary policy meeting, the Bank of England noted that while GDP has fallen sharply in March and April, the latest indicators for May and June suggest the economic impact as a result of the virus will be less severe than initially estimated for the second quarter.
BoE Deputy Governor Cunliffe is scheduled to speak later today in an online webinar. Fed members Williams and Brainard will also be speaking and Fed Chair Powell is due to testify before the House Financial Services Committee.
GBP/USD is currently testing support near 1.2270 while the US dollar index (DXY) is facing notable resistance.
DXY has been mostly trading sideways in June but was last seen testing the upper bound of the monthly range. A push above this resistance would suggest that a broader recovery might be in the works.
However, technical traders might look to sell at the resistance level in DXY which could lead to a bounce in GBP/USD.
If GBP/USD is able to hold above support at 1.2270, we might see a return back towards 1.2345 resistance. If the pair breaks lower from here, the next downside target falls at 1.2205.
- GBP/USD is set to post the largest loss among the major currencies for the month of June.
- The pair is faced with support while DXY is testing the upper bound of its monthly range.
- Trading activity is often heightened at the end of the month and quarter. This could lead to unusual volatility in the session ahead.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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