The GBP/USD crashed to the lowest level since November 2020 after the strong American consumer inflation data. It is trading at 1.3088, which is about 8% below the highest level in 2021.
UK GDP data preview
The GBP/USD pair has been in a strong downward trend in the past few months as the US dollar strength resumes.
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On Thursday, the pair’s sell-off continued after the US published strong consumer inflation data. According to the Bureau of Labor Statistics, American inflation jumped to about 7.9% in February as the cost of most items rose. Air tickets, food items, gasoline, and used cars were among the biggest movers.
Excluding the volatile food and energy prices, the core CPI rose from 5.8% to about 6% in February. As a result, in line with the hawkish decision by the European Central Bank, analysts expect that the Federal Reserve will adopt a more hawkish tone next week.
The GBP/USD pair will next react mildly to the latest UK GDP data that will come out on Friday morning. Economists expect the data to show that the UK economy rose by 0.2% in January after falling by 0.2% in the previous month.
On a year-on-year basis, the economy is expected to have risen from 6.5% to 9.3%. Strong GDP numbers will give the Bank of England (BOE) an incentive to maintain its hawkish stance.
The Office of National Statistics will also publish the latest manufacturing and industrial production data and construction output. Since the UK started winding down its Covid-19 restrictions this year, analysts believe that this production did well in January. For example, they expect that manufacturing production rose by 3.1% while industrial production rose by 1.9% on a year-on-year basis.
The daily chart shows that the GBP/USD pair has been under intense pressure in the past few months. It has fallen from a high of 1.4250 to a low of 1.3085. The pair has managed to move below the 50-day and 25-day moving averages.
Most importantly, it has fallen below the key support level at 1.3175, which was the lowest level this year. Therefore, there is a likelihood that the pair will continue its bearish trend as bears target the next key support level at 1.300.
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Source: https://invezz.com/news/2022/03/11/gbp-usd-forex-signal-sterling-crashes-ahead-of-uk-gdp-data/