Market News & Analysis

Top Story

GBP/USD Rises As UK GDP Stagnates, Powell Up Next

GBP/USD has advanced in early trade following the release of GDP data. Whilst on an annual and monthly basis economic growth beat expectations, on the more closely watched quarter on quarter basis the economy failed to grow. There was no surprise here.

Consumer spending was weak whilst business investment fell by 1%. But this is old news. The BoE had factored in 0% growth in Q4. This data is not going to make a rate cut by the BoE any more likely.

December’s hard data was also uninspiring, with manufacturing production missing estimates on both a monthly and yearly basis and with downbeat industrial production. Construction numbers were a rare source of light unexpectedly increasing 0.4% month on month vs a 0.4% decline forecast. 

Better data to come?
Yet the disappointing hard data prints could change over the coming months, as we have seen in recent survey’s, optimism has improved considerably following December’s general election. The big question is whether the improved soft data will filter down into stronger hard data? The BoE thinks it will, slowly, with 0.2% growth forecast for Q1 and 0.3% growth forecast for Q2. 
The BoE will not be tempted to cut rates on today’s prints instead the wait and see approach remains fitting, helping to lift the pound marginally.

Powell’s Testimony Before Congress
Attention will now turn to Fed Chair Jerome Powell who is due to testify before Congress today and tomorrow. His testimony comes at a key junction for the US economy as is leaves behind a bruising trade dispute with China, as the Fed battles low inflation but a sold labor market.  
Jerome Powell will hope to give his views on the economy and hint towards the path of monetary policy without tying himself or the Fed down. We expect is to be an overall upbeat testimony with a nod towards the threat of coronavirus to the global economy. 

Level to watch:
Despite jumping 0.1% higher GBOP/USD continues to trade firmly below its 50, 100 and 200 sma on the 4 hour chart with bearish momentum.
GBP/USD met resistance at yesterday’s high of $1.2948. A move above here could open the door back to $1.30 (high 6th Feb, round number & 50 sma) a level which could negate the current bearish trend.
Immediate support can be seen at yesterday’s and today’s low of $1.2895. A break through here could open the door to $1.2870 the low on (10th Feb).

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.