GBP Rallies on GDP Beat
The British Pound has seen a fresh wave of buying across early European trading on Friday, boosted by better-than-expected UK economic data. Figures released by the ONS today showed UK GDP rising 0.3% in January, topping expectations for a 0.1% rise. Marking a 0.8% recovery from the prior month’s 0.5% fall, the data suggests that the UK will likely avoid entering a technical recession and has seen GBP sentiment turn firmly bullish.
Weak Spots to Consider
However, while the headline data was positive, a look at the breakdown of the figure suggests the need for caution. The services sector led the recovery, itself rebounding from a negative reading in December to print 0.5% in January. However, both manufacturing and construction output were down 0.4% and 1.7% respectively.
Wages Data Due Next Week
While GBP is rallying on the headline that GDP recovered in January, the bigger focus for the BOE is measures of “inflation persistence”. With that in mind, next week’s wages data will be the key UK input to watch. If wages are seen falling back, this should boost the growth outlook, increasing the likelihood of the BOE pivoting on rates. However, if wages remain sticky this will likely fuel concern over inflation meaning rates might nee to be hiked by a further .5% this month, hurting the growth outlook in the UK.
Technical Views
GBPJPY
The first attempted breakout of the bear channel saw price rejected around the 164.56 level. However, the subsequent move lower found firm support into the 162.08 level. Price is now rallying firmly and with momentum studies turning higher, the focus is on a break o the 164.56 level and a continuation higher with 168.92 the longer-run target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.