The GBP/USD currency pair currently trades at 1.2510, reflecting a 0.53% increase, buoyed by mixed economic indicators and central bank positions. Despite the gains, technical analysis suggests a bearish outlook if the pair fails to maintain levels above the 50-day Simple Moving Average (SMA) at 1.2473. Should the price drop below this critical level, sellers might drive it further down towards the 1.2400 mark. This situation unfolds as the UK economy displays unexpected resilience, with GDP growth figures surpassing expectations and alleviating recession fears.
UK GDP figures released recently showed a surprising 0.1% growth, defying predictions and contributing to a yearly increase of 1.5%. This performance exceeded both forecasts and the previous reading of 1%. Following this data revelation, financial markets have adjusted their expectations regarding the Bank of England's (BoE) monetary policy. They now anticipate a rate cut in June and foresee approximately 55 basis points of easing by the end of 2025.
Meanwhile, across the Atlantic, the United States Federal Reserve maintains a cautious stance amid persistent inflationary pressures. Fed Chair Jerome Powell remarked that the central bank is approaching its inflation targets but still has progress to make in achieving them.
"We are close but not there on inflation," – Jerome Powell, Fed Chair
He also emphasized the need to keep monetary policy restrictive for now. Recent inflation data suggested a pause in the disinflation process, which had previously shown five consecutive months of price increases.
In January, the Core Producer Price Index (PPI) rose by 3.6% year-on-year, surpassing projections of 3.3%. Additionally, monthly core figures increased by 0.3%, aligning with estimates. The headline PPI remained unchanged at 3.5% but exceeded yearly forecasts. This data underscores the ongoing inflationary challenges faced by the U.S. economy.
U.S. labor market data presented a mixed picture, with Initial Jobless Claims for the week ending February 8 totaling 213,000, slightly below expectations of 215,000 and down from the February 1 reading of 220,000. This suggests some resilience in the job market despite broader economic uncertainties.
The divergence between central banks further complicates the GBP/USD outlook. While the BoE appears poised to ease monetary policy in response to economic conditions, the Fed maintains its restrictive stance due to inflationary pressures. This divergence favors potential downside risks for GBP/USD, even as the currency pair currently trades in positive territory.
Technical analysis indicates that while GBP/USD holds gains, its downtrend remains intact on the daily chart. A break below the 50-day SMA at 1.2473 could signal further declines. Conversely, potential upside exists if buyers challenge the key resistance levels at 1.2600 and the 100-day SMA at 1.2700.