(MENAFN- Daily Forex) The gbp/usd may be ready to resume its bullish trend and end its losing streak against the euro after a series of economic and political developments came together to shatter the gloomy economic consensus hanging over the UK economy. The price of the sterling currency pair against the US dollar, GBP/USD, moved positively for two days in a row, with gains that reached the resistance level at 1.2147, and settled around the level of 1.2060 at the time of writing the analysis. Advertisement test out your technical skills now! open a free demo account
The data results, which came in stronger than expected, indicating that the British economy is on its way to avoiding recession with a return to growth in February. In addition, developments in the gas market indicate that the second half of 2023 will see improved growth with household energy bills declining again.
According to trading, the British pound rose against all other major currencies, after the S&P Global Composite PMI reached a reading of 53.0 (above the 50 level, which indicates that the economy is growing), exceeding the consensus expectations of 49 (contraction). Commenting on this, Clyde Wardle, senior analyst in foreign exchange markets at HSBC, said that“The pound has become more stable after readings of better than expected PMI.” PMI data point to a stronger recovery in the UK in February as corresponding data from the Eurozone (52.3), France (51.6) and Germany (51.1) were weaker than expected.
Accordingly, the analyst adds that“We see room for further gains in the pound in the future.”
The list of data supporting the UK in February also includes:
UK Retail Sales for January 2023 increased by 0.5% on a monthly basis, against expectations for a decline of 0.3%. The country's inflation rate came in at 10.1%, slightly below market expectations of 10.3%, but the all-important core rate fell by 0.9% m/m in January, which was much higher than the -0.5% expected. Core wages rose 6.7% in January, beating consensus expectations of 6.5%. The number of employees increased by 74 thousand against market expectations of 40 thousand.
“Together, the data has a soft bearish feel, a far cry from some of the stagflation and economic meltdown views that seemed prevalent late last year,” says Paul Robson, currency analyst at NatWest Markets. NatWest Markets expects the pound to eventually resume its stalled bullish trend against the dollar and sees increased odds of it appreciating significantly against the euro.
Meanwhile, the UK posted an unexpected budget surplus in January according to data also released on Tuesday, which showed tax revenues outpaced spending for the month. Markets were expecting another deficit to be recorded in the national accounts. Public sector net borrowing (excluding banks) in January 2023 was a surplus of £5.4 billion according to the Office for National Statistics, and the consensus was looking for a reading of -6.95 billion. The data leads to expect more opportunities for Chancellor of the Exchequer Jeremy Hunt to provide more support to families under pressure when he sets his budget for next year next month.
However, the British pound remains near its post-Brexit lows, the analyst notes, trading materially lower only when the negative news flow was more extreme. These moments included political turmoil amid the Brexit negotiations, Covid, the Great Financial Crisis, and the UK's own financial crisis around the time of former Prime Minister Liz Truss' mini-budget. Therefore, on this basis, it would take another major shock to retest the pound's September lows, which is less likely given the recent trajectory of British politics.GBP/USD Forecast
The last rebound so far, the GBP/USD has not exited the bearish trend yet, and according to the performance on the daily chart below, the shift may actually occur if the bulls move in the currency pair toward the resistance levels of 1.2270 and 1.2430, respectively. Until now, I still confirm that the currency pair moved towards and below the psychological support level of 1.2000, which supports a further collapse of the currency pair, and I still prefer selling the GBP/USD from every rising level.
The currency pair will be affected today by the announcement of the growth rate of the US economy along with the number of weekly jobless claims. This is in addition to investor sentiment and the performance of global financial markets.
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