GBP/USD plummets to fresh 22-month lows and hovers around 1.2450s after US data

• The GBP/USD is recording its worst monthly losses since March 2020, down some 5.43%.
• The US economy contracted by 1.4% and missed economists’ 1% expansion foreseen.
• GBP/USD Price Forecast: To remain downward pressured unless bulls reclaim 1.2700

The British pound keeps plunging, extending its April monthly fall to 5.43%, and it is approaching the 1.2400 figure on Thursday amidst an upbeat tilted mood, despite that some US and European indices record losses. At the time of writing, the GBP/USD is trading at 1.2440

US economy contracts for the first time in two years, sentiment improves

Sentiment improved as China’s Covid-19 outbreak got under some control while the Russia-Ukraine conflict continued. Aside from this, recent US economic data crossed the wires, as the Gross Domestic Product for the first quarter showed a contraction of 1.4% on an annualized pace, the first in nearly two years, though it’s unlikely to deter the Federal Reserve from hiking interest rates as it attempts to tackle inflation.

Stagflation talks began once the report hit the wires. However, analysts at ING wrote that domestic demand held up firmly when considering the hit to the economy momentum caused by the Omicron variant last year.

They added that “consumer spending grew 2.7%, while non-residential investment expanded 9.2% and residential investment posted a 2.1% gain.” They attributed the negative figure to the drop in exports and imports surplus.

Also in the US docket, the Department of Labour released the Initial Jobless Claims for the week ending on April 22, which rose by 180K, lower than the 182K estimated.

Meanwhile,  back to geopolitics, Russia’s Foreign Ministry said that Russia had not received a response from Ukraine on a potential agreement and also informed that Russia will hold an informal UN Security Council meeting on May 6^th regarding the situation in Ukraine.

Due to the market sentiment, the GBP/USD should rise as the GBP is considered a risk-sensitive currency, opposite the safe-haven US dollar. Nevertheless, the Fed’s pace of tightening appears more aggressive than the Bank of England’s, and with both banks having interest rates decision in the next week, it would be prudent to wait and see before opening fresh bets.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is bearish biased and seems poised to extend to lower price levels. The Relative Strength Index (RSI) is at 18.61, well within the oversold territory, but its slope remains headed south, meaning that the GBP/USD might continue sliding.

That said, the GBP/USD first support would be 1.2411. A breach of the latter would expose the 1.2400 figure, followed by 1.2300, and then June’s 29, 2020, daily low at 1.2251.