- The GBP/USD currency pair has retreated from its highest level in seven months, with losses extending to the 1.2746 support level before settling around 1.2800 at the time of writing the analysis.
- The recent gains in sterling dollar reached the 1.2893 resistance level, especially after the announcement of US jobs figures at the end of last week.
Recently, the pound was negatively affected, as UK GDP figures met expectations, while a slightly stronger-than-expected US CPI reading boosted the US currency. According to the results of the economic calendar data, the latest data released by the Office for National Statistics showed that UK GDP expanded by 0.2% on a monthly basis in January, driven by a rebound in retail and housebuilding, after falling 0.1% in December. At the same time, economic data released earlier showed that UK regular wages grew by 6.1% on an annual basis in the three months to the end of January. This was the slowest pace since the three months to October 2022 and slightly below the expected increase of 6.2%. As a result, traders maintain expectations that the Bank of England is likely to cut interest rates for the first time in August, while they expect potential rate cuts by the European Central Bank and the US Federal Reserve as early as June.
Will the price of the British pound decrease in the coming days?
According to forex trading, the pound rose against the dollar by 0.0014 or 0.11% to 1.2805 on Wednesday, March 13, from 1.2791 in the previous trading session. Technically, the pound is expected to trade at the 1.26 support level by the end of this quarter, according to global macroeconomic models and analyst expectations. Looking ahead, we expect it to trade at 1.24 in 12 months.
As announced yesterday, the UK economy returned to growth in January, according to monthly GDP data, which could help the pound stabilize after its recent decline against the euro and the dollar. The pound-to-euro exchange rate appeared to be extending recent losses at 1.17 after the Office for National Statistics reported that the UK economy grew by 0.2% on a monthly basis in January. At the same time, the pound-to-dollar exchange rate reached 1.2790. The 0.2% growth is in line with investor expectations and compares favorably with the -0.1% recorded in December.
A detailed analysis shows a strong rebound in the UK services sector, which is the main driver of growth (+0.2% on a monthly basis), a result that was pointed out by official retail figures for January released last month. The jump in construction output (1.1% monthly/monthly) also helped. Also, the UK manufacturing output was unchanged at 0% on a monthly basis in January, down from 0.8% in December and in line with expectations. Industrial production was disappointing at -0.2%, below the expected 0%. This data suggests an improvement in activity; however, the recovery is uninspiring and speaks of an economy that has been flat for months.
For the pound, the figures could have been worse and added to the current week's losing streak. However, meeting expectations could put a floor under the sell-off and allow for some consolidation near current levels. According to analysts, "Momentum is likely to remain weak in the near term, but the outlook for this year is improving. With energy price inflation and domestic inflation moderating faster than expected, the chance of a modest rate cut in the summer has increased. Moreover, the recent budget will provide some additional relief to consumers and build on the measures in the Autumn Statement to boost business investment incentives."
GBPUSD Expectations and Analysis Today:
According to the performance on the daily chart attached, the price of the British pound against the US dollar GBP/USD is in a neutral position. The tendency will be upward if the bulls move in the currency pair towards the resistance levels of 1.2820 and 1.2900, respectively. As we mentioned before, the psychological resistance of 1.3000 will remain an important symbol of the upward trend. On the other hand, the support level of 1.2600 will remain the most important for changing the general outlook to bearish. Today, the economic calendar is devoid of important British releases. Therefore, all focus will be on the announcement of American data, represented by the producer price index reading, retail sales figures, and the number of weekly unemployed claims.
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