Forexpros – The pound turned lower against the U.S. dollar on Wednesday, retreating from a five-month high after official data showed that the U.K. economy has fallen back into a recession.
GBP/USD hit 1.6082 during European morning trade, the pair’s lowest since Monday; the pair subsequently consolidated at 1.6084, shedding 0.38%.
Cable was likely to find support at 1.6037, the low of April 20 and resistance at 1.6070, the session high and a five-month high.
The U.K. Office for National Statistics said gross domestic product contracted by 0.2% in the three months to March after contracting by 0.3% in the fourth quarter, confounding expectations for 0.1% growth.
The report said that first quarter construction output was down by 3%, the biggest drop since the first quarter of 2009, and compared with a drop of 0.2% in the fourth quarter.
Industrial output was 0.4% lower, while output in the U.K. service sector, which comprises more than three quarters of GDP increased by just 0.1%.
Following the release of the data, U.K. Chancellor George Osborne said the economic situation is very difficult but warned that abandoning the government’s deficit reduction plan would make the situation even worse.
The pound had strengthened against the dollar and the euro in the past week, as investors trimmed back expectations for another round of monetary stimulus from the Bank of England following the release of the bank’s April minutes.
The pound was also lower against the euro and the yen, with EUR/GBP adding 0.45% to hit 0.8213 and GBP/JPY shedding 0.48% to hit 130.62.
Later Wednesday, the U.K. was to release a report on industrial order expectations, while the U.S. was to publish government data on durable goods orders. In addition, the Federal Reserve was to announce its benchmark interest rate and release its rate statement.
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