Due to the Fed’s aggressive remarks and positive US statistics, the US Dollar is expected to end the week with significant gains. The University of Michigan observed an increase in US consumer sentiment. The UK escaped a recession in Q4 2022, even though its future economic prospects point to a declining pound value. USD/GBP Exchange Rate Analysis: A bearish continuation would continue with a daily closure below 1.2032.
The 50-day Exponential Moving Average (EMA) at 1.2126 is challenged by the GBP/USD currency pair, which has lost three consecutive days of gains and advances as economic data from the UK revealed little economic growth. At the same time, consumer confidence in the US increased. The GBP/USD exchange rate at the time of writing is 1.2055.
The US consumer mood is improving, while the UK GDP is still sluggish. After data from the University of Michigan (UoM) revealed that Consumer Sentiment exceeded expectations of 65 and jumped to 66.4, suggesting a stronger financial condition, the GBP/USD extended a leg downward. In addition, the projected annual inflation rate increased from 3.9% in January’s final reading to 4.2%, but the projected inflation rate for the next five years stayed at 2.9%.
As a result, the US Dollar Index (DXY), a gauge of the value of the dollar relative to a basket of peers, rises 0.60% to 103.65, supported by US Treasury bond rates that, as a result of hawkish Federal Reserve (Fed) speakers’ rhetoric over the past week, breached the 3.70% barrier, reaching 3.728%.
The UK’s economic docket was presented during the European session. It showed that the country’s GDP for the last three months of 2022 was zero percent, avoiding a recession that the Bank of England had predicted (BoE). The Office for National Statistics announced that the GDP decreased by -0.5% in December every month (ONS).
As the BoE tries to control inflation, which hit a 41-year high of 11.1% in October 2022, a grim picture for the UK implies that the British Pound (GBP) will be under pressure. A divided vote among the BoE’s members was evident at its most recent monetary policy meeting. It would be fascinating to hear the BoE’s future talks and recommendations, which might reaffirm the central bank’s commitment to fighting inflation.
Technical Analysis of the GBP/USD.
On the daily chart, the GBP/USD would consolidate between the 50-day EMA, which is at 1.2126 upward, and the 100-day EMA, which is at 1.2032 downward. However, the Rate of Change (RoC) changed to neutral, and the Relative Strength Index (RSI) entered the negative zone, supporting a bearish continuation. As a result, the psychological 1.2000 level would be the next support for the GBP/USD, followed by the 100-day EMA at 1.2032. The GBP/USD exchange rate might test its YTD low of 1.1841 if there is a clear breach.
This post is originally published on EDGE-FOREX.
