(MENAFN- Daily Forex)
Recent trading sessions have seen a general decline in the GBP/USD pair, with losses nearing the psychological support level of 1.3000. This strengthens the bears' control over the trend and signals a potentially stronger downward movement. The next strongest support below 1.3000 would pull the GBP/USD pair towards the 1.2860 support level, which in turn would push technical indicators towards oversold levels.
Technical forecasts for the GPB/USD pair today:
The recent strong gains of the US dollar against the rest of the major currencies in the Forex market. They were supported by the strength of the US jobs numbers and then the inflation numbers, in addition to the content of the minutes of the last meeting of the Federal Reserve Bank. Furthermore, this confirms that the bank will not be in a hurry to cut US interest rates more strongly in the remainder of 2024. Based on the daily chart, the overall trend for GBP/USD will remain bearish until the markets react to the UK economic data throughout the week. The 1.3230 resistance level will remain the most important for bulls to control the trend.
According to the Economic Calendar this week, the government must use this week's investment summit and the upcoming budget to reverse the course of the slowing economy. The Office for National Statistics said that UK monthly gross domestic product (GDP) rose by 0.2% month-on-month in August after two months of no growth.
This puts real GDP on track to expand by 0.3% on a quarterly basis in the third quarter of 2024, in line with the Bank of England's forecast. However, revisions to second-quarter GDP data mean that the 0.2% reading for August was below the consensus forecast of 0.5%, and the previous month was revised downward on this measure.
In August, services output - the dominant sector of the UK economy - rose by 0.1% month-on-month, while industrial production and construction output partially recovered from their declines in July. Commenting on the results, Hayley Lu, assistant economist at the National Institute of Economic and Social Research, said: "Today's growth figures were slightly weaker than we expected.
While the economy continues to expand, there are increasing signs that momentum is fading compared to the strong performance seen in the first half of the year." She added that the chancellor should seize the crucial opportunity in the upcoming budget to announce policies that boost higher investment levels and drive the UK towards a sustainable era of higher output growth.
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Also, the Bank of England will monitor signs of slowdown and be prepared to cut interest rates. Analysts warn that a slowing economy means that growth looks set to fall short of the latest set of forecasts from the bank. Sam Hill, an analyst at Lloyds Bank, said: "There would need to be a strong performance recorded for the September monthly GDP figure to not fall below the MPC's forecast for third-quarter GDP."
Meanwhile, Services growth was weak at just 0.1%, with seven of the 14 subsectors contracting in August.
UK investment summit must reset agenda
Pantheon Macroeconomics expects GDP growth to rise to 0.4% on a quarterly basis in the fourth quarter as consumers cut back on their savings slightly in response to lower interest rates, falling unemployment, and continued real wage growth. Barret Kupelian, chief economist at PricewaterhouseCoopers, says, "We expect the positive momentum to continue in the coming months given some of the tailwinds we see in the domestic economy."
The upcoming UK Investment Summit should give the government a chance to reset the tone of the UK's potential and inspire increased investment, he added. The new government has long complained about the legacy it has left behind, warning that tax cuts and tough decisions are needed to fill a“black hole” in the budget.
But Anna Leitch, chief economist at the Institute of Directors, says the government must shift the narrative from plugging the deficit today to building the economy of tomorrow. Added,“This is key to sustainable public finances and higher living standards. The Investment and Budget Summit provides an opportunity for the government to build on its election manifesto commitments to drive investment by providing more detail on the role of the National Wealth Fund in stimulating private capital and the early priorities of the industrial strategy.”
Furthermore, The UK Investment Summit is scheduled to take place on October 14 and aims to "bring together up to 300 industry leaders to stimulate investment in the UK". However, concerns about the quality and organization of the UK Investment Summit have left some senior business figures hesitant about whether they will travel to the event on Monday.
According to the Financial Times, international and domestic executives have expressed frustration at the lack of information from the UK government about its flagship gathering in London, with some even questioning whether the event is worth the effort.
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