GBP/USD probes bears above 1.2200 on UK data dump, BOE, Fed eyed
- GBP/USD bounces off intraday bottom on mostly upbeat British data.
- UK data came in mostly firmer-than-expected and challenges the previous fears surrounding the British economy.
- US Dollar cheers risk-off mood ahead of the key US inflation, Fed meeting.
- Light calendar elsewhere restricts the pair’s immediate moves even as bears struggle to retake control.
GBP/USD picks up bids to rebound from the intraday low of 1.2207 after the UK data flashed upbeat statistics during early Monday. In doing so, the Cable pair challenges the previous pessimism surrounding the British economy and likely challenges for the Bank of England (BOE). However, broad-based US Dollar strength, amid recession woes and the pre-Fed anxiety, challenges the Cable pair buyers.
That said, the UK’s Gross Domestic Product (GDP) for October rose to 0.5% MoM versus -0.1% expected and -0.6% prior while the Manufacturing Production growth rallied by 0.7% compared to -0.1% market consensus and 0.0% previous readouts. Further, the Industrial Production also marked a positive surprise compared to -0.3% expected as it came in at 0.0% MoM for October versus 0.2% prior.
Also read: UK GDP rebounds 0.5% MoM in October vs. -0.1% expected
Despite the firmer UK data, the looming recession over the British economy joins the hawkish hopes from the Federal Reserve (Fed) to keep the GBP/USD rebound in check. Earlier in the day, Reuters quoted statements from a British trade body Make UK while saying, “UK manufacturers foresee output falling by 3.2% in 2023.” On the same line is the news stating that the UK lenders see 23% slide in mortgages for home-buyers in 2023.
It should be noted that the US Dollar Index (DXY) prints 0.20% intraday gains of around 105.20 by the press time. In doing so, the greenback’s gauge versus the six major currencies rises for the second consecutive day.
The DXY defied a two-day downtrend on Friday after upbeat figures from the US Producer Price Index (PPI) and the University of Michigan’s (UoM) Consumer Sentiment Index for November and December respectively. Also likely to have favored the greenback bulls could be the recently firmer inflation expectations that underpin the hawkish bets on the Federal Reserve’s (Fed) next move. Additionally, fears of global recession and the traditional safe-haven status also underpin the US Dollar’s run-up of late.
Against this backdrop, the US stock futures print mild losses while the Treasury yields grind higher, which in turn keeps the GBP/USD bears hopeful.
Having witnessed the initial reaction to the UK data, the GBP/USD pair traders will pay attention to Tuesday’s British employment data and the US Consumer Price Index (CPI) for more clarification of the trend before monetary policy meetings of the Fed and the BOE. It’s worth noting, however, that the comparatively more hawkish concerns surrounding the US Federal Reserve than the Bank of England (BOE) join the economic fears concerning the UK to keep GBP/USD bears hopeful.
Technical analysis
A one-month-old rising wedge bearish chart pattern, currently between 1.2205 and 1.2485, teases the GBP/USD bears.