The GBP/USD exchange rate continued its comeback after the US published its inflation data on Thursday and after the latest UK GDP numbers. The pair jumped to a high of 1.2246, the highest point since December 15. It has risen by over 3% from its lowest point in 2023.
UK GDP and US inflation
The biggest forex news of this week was the latest American consumer inflation data. According to the Bureau of Labor Statistics (BLS), the country’s consumer price index dropped for the sixth straight month. It declined from 7.1% in November to 6.5% in December.
Core inflation also moved downwards. It moved from 6.3% to 5.7%, which is a signal that the Federal Reserve is achieving its goal on both inflation and job stability. As we wrote in this article, data published this month showed that the country’s unemployment rate dropped from 3.7% in November to 3.5% in December.
Therefore, the GBP/USD price rose because investors expect that the Fed will continue to downshift its interest rates. It hiked rates by 0.50% in December after hiking by 0.75% in the previous four meetings. As such, some analysts expect that it will start hiking by 0.25% in its February meeting. ING analysts are also pricing in two rate cuts in the second half of the year.
The other important news was UK GDP data. According to the Office of National Statistics (ONS), the country’s economy expanded slightly in November as services activity boomed. It grew by 0.1% on a month-on-month basis leading to a YoY increase of 0.2%. As such, some analysts believe that the economy will avoid the third month of contraction.
Additional data showed that manufacturing and industrial production declined by 5.9% and 5.1%, respectively. A key concern for the UK economy is the ongoing strikes in the country.
GBP/USD forecast
The four-hour chart shows that the GBP/USD exchange rate has been in an upward trend in the past few days. In this period, the pair has managed to move above the descending black channel. It is also being supported by the 25-day and 50-day moving averages. The pair also managed to move above the important resistance point at 1.2200.
Therefore, the outlook for the GBP to USD exchange rate is bullish, with the next key level to watch being at 1.2300. The stop-loss of this trade will be at 1.2100.
The post GBP/USD price analysis: Bulls in the driver’s seat for now appeared first on Invezz.
Source: https://invezz.com/news/2023/01/13/gbp-usd-price-analysis-bulls-in-the-drivers-seat-for-now/