Forex Flash: GBP/USD close above 1.5400 needed to confirm upside breakout - BBH

FXstreet.com (Córdoba) - The UK is the first G7 country to report Q1 GDP, notes the BBH analyst team. According to them, the market had been prepared for a +/- 0.1% reading, and the upside surprise of a 0.3% expansion sent sterling to above 1.5450, the highest since February 20.

"This area (1.5450) also corresponds to a retracement objective of sterling's slide since the start of the year", BBH says. "That said, the failure to finish the North American session today above $1.54 would be disappointing and would fail to confirm the upside breakout".

Meanwhile, regarding the positive GDP reading the BBH team notes that even though many observers will see in the UK's GDP report evidence that it has avoided a triple dip, this is not a very helpful way to conceptualize what is happening in the UK. "For all practical purposes, the UK economy has essentially stagnated. It remains in a trough".

However," the stronger than expected GDP figure, which offsets the 0.3% contraction in Q4, may give the UK government's resolve to stay on the austerity course, despite the increasing pressure from the IMF to do otherwise", BBH commented. "It also means that BOE Governor King, having been outvoted on the MPC, may not win over many converts to his desire to resume gilt purchases".