GBPUSD Downside Momentum Eases As Market Waits for Cues from US Data

Summary:

GBPUSD has suffered losses on lower-than-expected Q4 2023 GDP printout from the UK, but the selling pressure is not as intense.

GBPUSD continued with its downside action in the London session on Thursday, shedding 0.12% to trade at 1.2551 at 9.00 am GMT. The pound is under pressure from the US dollar after the UK economy contracted by 0.3% in the fourth quarter of 2023, above the forecasted -0.1%. This has raised concerns that the British economy is not out of the woods yet. Furthermore, the market seems to have ignored the positive data coming from December industrial production (+0.6% actual vs. the predicted -0.1%) and Manufacturing Production (+0.8% actual vs. predicted -0.1%).

The market will be keen on the statement by Bank of England Monetary Policy Committee member Catherine Mann, scheduled for release Thursday afternoon. Her speech will especially carry weight, considering that it will come on the heels of the GDP figures release. Investors will be looking for hints on the next course of action by the BOE with regards to interest rates.

However, the biggest impact on the GDPUSD pair will likely come from the scheduled release of three key US economic data. Key among these are the Initial Jobless Claims data, projected at 219,000. A figure below this will be bullish for the US dollar, as it will point to a robust economy creating jobs at a faster rate than expected. On the other hand, a higher figure will be bearish for the dollar.

The other key releases will be the January Core Retail Sales data and the February Philadelphia Fed Manufacturing Index. The former is projected to come at 0.2% while the latter is projected at -8.0. Figures above projections will strengthen the dollar further and vice versa.

Key indicators signal that the US dollar is currently on the edge-yields on the 10-year US bonds have been on the downtrend over the last 24 hours, going down from Tuesday’s 4.31% to stand at 4.23% at the time of writing. Similarly, the DXY index has edged lower from 104.859 on Tuesday to 104.613 at the time of writing. Therefore, the dollar’s recent rally could come to an end if today’s fundamentals drift significantly from projections.

Technical analysis

The GBPUSD pair lacks downside momentum on the 30-minute chart. A pivot at 1.2535 with a bullish bias looks likely. Control by the buyers could create upside momentum to meet resistance at 1.2590, beyond which the pair could test 1.2610.

However, if the bears take control, we could see GBPUSD spend more time under 1.2535. Furthermore, a break below the first support at 1.2515 will confirm control by the bears, and invalidate the bullish view. If the sellers sustain their momentum, we could see the pair find another support at 1.2500.