- During yesterday's trading session, the GBP/USD price got positive momentum from the British economic numbers.
- It helped in a rebound upward for the currency pair toward the resistance level of 1.2147, starting from the support level of 1.1986 on the same day.
- All in all the UK economy will comfortably avoid recession if the results of the latest S&P Global PMI survey are anything to go by.
According to trading, the pound sterling jumped against the euro, the dollar, and other currencies after the composite PMI – which includes the manufacturing and services sectors together – rose in the United Kingdom to a reading of 53 in February, shattering expectations of a reading of 49. This represents a significant increase in activity in the month of January by 48.5. A reading below 50 indicates contraction, while a reading above indicates growth.
For its part, Standard & Poor's Global said that private sector companies in the United Kingdom indicated a strong recovery in business activity during February, which ended a six-month period of declining production. The Manufacturing PMI provided a strong recovery, coming in at 49.2, beating expectations of 47.5 and 47 January. The Services PMI came in at 53.3 beating expectations of 49.2 and 48.7 for January. S&P Global said respondents cited increased customer demand and improved business confidence in February, due to lower economic uncertainty, lower supply shortages, and lower inflation. In fact, the February survey indicated the slowest overall increase in average cost burdens since April 2021.
Strong customer demand contributed to renewed increases in backlogs and employment across the private sector economy during the month of February. The results indicate that the economic recession and high unemployment rates, long expected by the Bank of England, remain a long way off. As such, expectations of an imminent end to the price hike cycle may be misplaced. The prospect of a stronger economic outlook and higher interest rates supports the Sterling, which remains subject to persistent negativity among financial analysts and market participants.
Input cost inflation eased for the third consecutive month in February, with manufacturers reporting a particularly marked slowdown in price pressures. Lower purchase prices mostly reflect lower fuel costs and lower freight rates. Some companies have also indicated lower supplier surcharges linked to natural gas prices.
The picture is consistent with one of the rapidly declining inflation rates in 2023.
However, the Bank of England will note the PMI findings that companies say higher employee salaries led to a sustained increase in the prices charged to consumers. The Bank of England said it remains alert to wage pressures as it seeks to reduce inflation by raising interest rates. Markets are currently anticipating a further 25bps rally in February, then a possible halt.
GBP/USD Forecast:
Despite the recent rebound, the general trend of the GBP/USD pair is still bearish, according to the performance on the daily chart. The move towards and below the psychological support level of 1.2000 will remain supportive of the bears' control over the trend.
From it, it is possible to move towards stronger support levels, which are 1.1945 and 1.1880, respectively. It is sufficient to push the technical indicators toward oversold levels. On the other hand, over the same period of time, breaking the important 1.2230 resistance level, to enable the bulls to start controlling, and so far I still prefer to sell the Sterling Dollar from every bullish level.
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