Gbpusd drops amid mixed economic data from the US and UK

GBPUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.26%	-33.2 Pips
Week to-date	-0.02%	-2.4 Pips
February	1.29%	160 Pips

Upcoming key events (London Time)

Fri 07:00 AM GBP Retail Sales Volumes (1-mth)

What happened lately

In the United States, the latest economic data from January shows a slight increase in building permits to 1.483 million from December’s 1.482 million, according to the Census Bureau. Conversely, housing starts decreased significantly to 1.366 million, falling from the revised December figure of 1.515 million. Moreover, the New York Empire State Manufacturing Index showed a notable improvement in February, increasing to 5.7 points from January’s -12.6 points, as reported by the New York Fed.

The United Kingdom’s economic performance in January exhibited mixed signals. The Consumer Prices Index (CPI) saw a decline to -0.1% from December’s 0.3%. Nonetheless, the CPI for the 12 months ending in January rose to 3% from 2.5%. The Core CPI Inflation Rate also showed an increase to 3.7% over 12 months. The Retail Price Index for January marginally increased to 3.6% annually but decreased monthly to -0.1%. Additionally, the Producer Price Index, both monthly and annually, showed improvements from previous figures, indicating some inflationary pressure. Employment data were more positive, with labor surveys reporting an employment change increase to 107K in December from 35K in November, alongside a steady unemployment rate of 4.4%. Wages also increased, with average earnings including and excluding bonuses rising to 6% and 5.9% respectively. However, the claimant count change worsened, rising to 22K from 0.7K. The Claimant Count Rate remained constant at 4.6%.

The effects of this economic information on GBPUSD are multifaceted. The decline in UK’s short-term inflation measures coupled with positive long-term inflation data suggests the potential for monetary policy adjustments to address inflationary pressures. Meanwhile, stable employment and wage increases may provide underlying support for consumer spending, potentially aiding economic growth. The mixed U.S. data, with improved manufacturing but weaker housing activity, adds further complexity to the currency pair’s outlook. As a result, GBPUSD’s recent drop by 0.26% to 1.25818 could reflect market adjustments ahead of possible central bank actions and upcoming economic indicators like the UK retail sales data, which could further influence market sentiment and currency movements.

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What can we expect from GBPUSD today?

GBPUSD on Wednesday dropped -0.26% to 1.25818. Price is above 9-Day EMA while Stochastic is falling in overbought zone.

Updated daily direction for GBPUSD looks bearish as the pair posted lower in Wednesday trading session.

Looking ahead for the day, immediate support level is at S1 1.25504 with break below could see further selling pressure towards S2 at 1.2519. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.26382 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.25629 would indicate selling pressure.

For the week to-date, take note that GBPUSD is mixed as compared to the prior week.

Key levels to watch out:

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