By the end of last week's trading, the pound sterling declined against the rest of the other major currencies, due to the disappointing economic data. In general, the British pound strengthened against its US dollar throughout the year, but the currency suffered in the past week, as the US dollar found renewed life as recession fears increased.
Can the pound change things in the second half of 2023?
The GBP/USD currency pair collapsed to the support level of 1.2444, as a result of profit-taking sales, which were often mentioned as possible. This is after testing the resistance level 1.2680 last week, its highest level in a year, and settling around 1.2470 at the time of writing the analysis.
According to the Office for National Statistics (ONS), British gross domestic product for the first quarter increased by just 0.1%, unchanged from the previous quarter and in line with economists' expectations. GDP fell 0.3% in March, down from 0% in February. Industrial and manufacturing production each rose 0.7% in March. However, on a year-over-year basis, industrial production and manufacturing production fell by 1.3% and 2%, respectively. Construction orders fell at an annual rate of 14.3% in the first quarter, while construction production rose 4.1% year-on-year in March.
Britain's trade balance came in at -2.864 billion pounds, and the goods trade balance remained relatively unchanged at -16.356 billion pounds. It comes as the annual inflation rate remains above 10%, even as the Bank of England raises interest rates.
But while economists show that the British economy is suffering from a bout of stagflation - a combination of high inflation and weak growth - British officials say the country's economy is improving. In this regard, British Finance Minister Jeremy Hunt told CNBC at the G7 summit in Niigata, Japan: “I think the United Kingdom is back, and these are numbers that no one expected even three months ago.” And “But I think we realize there is still a long way to go. And we still have very high inflation, growth still isn't as high as we'd like it to be, and when I talk to my fellow finance ministers, we're all talking about the same thing. Showing employment, productivity, and how we're going to increase growth rates over the long term so that we can pay for the growing number of things that taxpayers want governments to do."
Sterling forecast against the dollar today:
- There has been a breach of the general bullish trend of the GBP/USD pair.
- The bears' control over the trend will increase if the currency pair continues its recent move, reaching the support levels 1.2380 and 1.2290, respectively.
- On the other hand, and over the same time period, the bulls' move towards the resistance 1.2585 will be important for the bulls' strong and continuous control over the trend.
- I still prefer selling the currency pair from every upside.
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