The UK's Office for National Statistics released data last Friday showing that the country's Gross Domestic Product (GDP) contracted by 0.1% month-on-month in April, following a 0.3% growth in March, which aligned with market expectations.

This indicates that after an improvement at the end of the first quarter, the UK's economic growth momentum slowed at the beginning of the second quarter, suggesting continued pressure on the economic recovery.

Looking at specific components, the UK services sector maintained a degree of resilience. The three-month services index up to April grew by 0.8%, unchanged from the previous data, showing that the service sector, which constitutes the main part of the UK economy, continues to support overall economic activity.

However, uncertainties surrounding consumption, business investment, and the external economic environment could potentially impact the future pace of expansion in the services sector.

In addition, Capital Economics economist Ruth Gregory noted in a recent report that while the Bank of England retains the possibility of further interest rate hikes, considering economic growth, consumption performance, and the inflation outlook, maintaining the current interest rate level is likely to be the most probable policy path for this year.

The report suggests that the 0.1% month-on-month decline in UK GDP in April ended the positive momentum from the 0.3% growth in March, indicating that after a strong start to the year, the UK's growth momentum has already begun to weaken.

A cooling of economic activity will help alleviate demand-side pressures, thereby limiting room for further inflation increases in the future.

Although rising energy prices may push overall inflation higher in the short term, Capital Economics believes that the current UK economy lacks the conditions for sustained high inflation.

Slowing economic growth, cooling demand, and squeezed household incomes will, to some extent, curb ongoing price pressures.

Key data to watch today includes the US Empire State Manufacturing Index for June, Canadian Manufacturing Sales for April, and US Industrial Production for May.

US Dollar Index

The US Dollar Index traded in a narrow range last Friday, closing slightly higher on the daily chart.

Short covering provided some support for the currency, alongside increased expectations for a Federal Reserve rate hike.

Furthermore, positive economic data released from the US during the session also contributed to its strength.

However, signs of easing tensions in the Middle East capped the currency's upside potential.

In early Asian trading, the US Dollar Index declined following reports of a US-Iran agreement and is currently trading around the 99.60 level.

Today, resistance is noted near 100.00, with support around 99.00.

EUR/USD

The Euro traded within a range last Friday, closing slightly lower on the daily chart and is currently trading around 1.1600.

The strength in the US Dollar Index, supported by robust economic data and heightened Fed rate hike expectations, was the primary factor weighing on the Euro.

However, signs of easing Middle East tensions and solid economic data from Germany released during the session limited the pair's downside.

Today, resistance is noted near 1.1700, with support around 1.1500.

GBP/USD

The British Pound traded in a narrow range last Friday, closing modestly lower on the daily chart and is currently trading around 1.3440.

The strength of the US Dollar Index, buoyed by factors such as Fed rate hike expectations and positive US economic data, was the main driver pressuring the Pound lower.

Additionally, generally weak UK economic data released during the session also exerted some downward pressure.

However, signs of easing tensions in the Middle East limited the currency pair's losses.

Today, resistance is noted near 1.3550, with support around 1.3350.