GBP/JPY sees worst daily decline since February post-UK GDP

• The GBP/JPY strongly affected by the worse-than-expected UK Gross Domestic Product (GDP) 
• Traders have almost completely given up on rate hike on May 10, with odds below 20% after the miss on the UK GDP. 

The GBP/JPY is trading at around 150.41 down 1.14% as the Great British pound lost almost 200 pips against the Japanese yen on Friday in its worst daily decline since late February 2018.

Earlier in the European session, the preliminar UK Gross Domestic Product (GDP) for the first quarter came in well below estimates at 0.1% versus 0.3% forecast by analysts. The GBP/JPY bears took control and the cross melted about 180 pips in four hours.

The worst-than-expected GDP reading reinforces the already fragile sentiment on Sterling. The currency has been depreciating especially against the USD on the back of disappointing wage, inflation and retail sales data. Additionally, dovish comments from Bank of England officials further weakened the pound as investors wonder if a rate hike on May 10 is really in the realm of possibilities. Indeed, the odds of a rate hike in May have been consistently shrinking of late and the market is pricing that in. After the GDP release this Friday, the odds of May hike dropped to only 19.48% according to Reuters. 

Interestingly, this quarter GDP reading was the slowest since the fourth quarter of 2012. Construction was the weakest sector, dropping 3.3% and the cold weather is not entirely the main culprit as construction was already under pressure before the cold wave. On the other hand, services industries were the best performing sector contributing to GDP growth with an advance of 0.3% in the first quarter of 2018, however, the longer-term trend keeps showing a slowdown in services growth.

Meanwhile, the US indices are trading mixed on Friday after their strong advance yesterday, therefore creating a mild demand for the safe-haven yen. 

GBP/JPY 

The momentum shifted towards neutral to down. Support is seen at the 150.00 handle and the 148.38 swing low while resistance is seen at 150.92 and at the 152.00 handle.