Gbpusd rises as UK economy shows positive growth trends amid US inflation pressures

GBPUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	0.92%	114.2 Pips
Week to-date	1.4%	174 Pips
February	1.14%	141.1 Pips

Upcoming key events (London Time)

Fri 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In the United States, the labor market appears to be strengthening as Initial Unemployment Insurance Claims decreased to 213K in the week ending 08 February, compared to the previous revised figure of 220K. The Producer Price Index (PPI) in January saw an increase to 0.4% from 0.2% in December, indicating growing inflation pressures from producers. The 12-month PPI also rose by 0.2 percentage points to 3.5% in January. Similarly, the PPI excluding food and energy sectors during the same period increased to 3.6% from 3.5%. Consumer Price Index (CPI) data showed inflation gaining momentum as the inflation rate excluding food and energy registered an increase to 3.3% for 12-months, while the Core CPI for January showed a larger monthly increase of 0.4% from 0.2% the previous month. Meanwhile, the U.S. Monthly Treasury Budget Statement reported a significant deficit increase to -$129 billion in January from -$87 billion in December, potentially putting pressure on fiscal resources.

The United Kingdom’s economic indicators showed a positive trajectory toward the end of the year. The GDP growth for December improved to 0.4%, up from 0.1% in November, and the 12-month GDP in Q4 increased to 1.4% from 0.9% in Q3. Industrial production grew by 0.5% after a contraction in the previous month, and manufacturing production also experienced a solid rise, increasing to 0.7% from -0.3%. The three-month GDP in Q4 rose to 0.1% from 0% in Q3, suggesting a steady improvement in the economy. These indicators reflect a recovering economy that may further support the financial markets.

The news of strengthening U.S. producer and consumer inflation figures coupled with a declining unemployment claims figure highlights a robust economic landscape, which can exert upward pressure on the U.S. dollar. However, the widening fiscal deficit reflected in the Treasury Budget Statement could offset these gains by raising concerns over fiscal sustainability. On the other hand, the impressive GDP and production figures announced by the U.K. provide an underpinning for potential strength in the pound. With the GBPUSD pair edging up by 0.92% to 1.25656, the market might be balancing these developments, cautiously monitoring the upcoming U.S. Retail Trade data. The result of these economic indicators could lead to short-term volatility, especially with high-impact, scheduled U.S. economic data.

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What can we expect from GBPUSD today?

GBPUSD on Thursday rose 0.92% to 1.25656. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for GBPUSD looks bullish as the pair ended higher after Thursday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.26085 with break above could target R2 at 1.26514 or figure level area. While towards the downside, we are looking at daily low of 1.24419 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.25681 may suggest continuation after recent positive movement.

For the week to-date, take note that GBPUSD is bullish as the pair continued to trade higher and is up by 1.4% over the past few days.

Key levels to watch out:

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