Sterling (GBP) Surges Near 1.20 Mark Following Robust GDP Performance

Sterling (GBP) Surges Near 1.20 Mark Following Robust GDP Performance

March 12, 2023 0 By Wiley McDermott

The value of the British pound has continued to increase and it is currently being traded at 1.1996 in Europe.

This shows that the Great British Pound has moved upward by 0.62% in terms of its price.

Earlier, back on Friday, the GBP/USD pair surpassed the key level of resistance at 1.20 level.

U.K‘s GDP Grows 0.3%

The UK concluded a week with few events on a positive tone.

The country’s GDP growth for January was 0.3%, which was higher than the expected growth of 0.1%.

As far as 2022 was concerned the country somehow avoided the economic recession.

However, the country’s economic outlook is uncertain whether the economy can remain afloat in the current year.

The increase in today’s GDP has generated some positivity, causing the pound to experience a 0.50% rise.

The Bank of England has been striving to reduce the persistently high inflation rate of 10.1%, despite the improvement in GDP which is a positive development.

The BoE has adopted an assertive approach by increasing the interest rate to 4.00%. But unfortunately, it has not yielded the desired outcomes, and inflation remains at double digits as of now.

On March 23, the BoE is expected to increase interest rates, according to widespread expectations.

The market has reached a maximum interest rate of 5%, but there are demands for the central bank to loosen its strict monetary policy.

Swati Dhingra, one of the members of the committee that formulates the monetary policy, on Wednesday said “there is no need for further tightening as inflation is decreasing quickly.”

She also stretched her argument by saying that any further increase in the interest rate will harm the country’s economy.

What Does The Technical Outlook of GBP Suggest?

The currency pair GBP/USD has surpassed the resistance level situated at 1.1931. Further up, there exists another resistance level at 1.2037.

Crossing this level will set up the tone for GBP price for the rest 0f 2023.

Currently, there is a level of support at 1.1931.

The currency markets are gradually transitioning to a new phase where prices are experiencing different patterns of price movements.

A value of 1.20 for the British pound against the US dollar is relatively low compared to historical rates.

There have been times when GBP was worth 2 USD.

Investors at the moment are waiting for contradictory economic data from the UK and the US alongside the Federal Reserve’s hawkish stance.

Whereas the UK data shows a positive outlook. On the flip side, the employment statistics in the US for February revealed a more robust job expansion than anticipated.

However, the projected rise in wages was slightly lower than expected.

On Thursday, data indicated that there was an unforeseen increase in weekly unemployment claims, reaching the highest level in more than two months.

As per the fear of inflation, the Feds in the USA are willing to take all sorts of risks to counter inflation.

On the flip side, the monetary policy maker of the U.K is afraid that further spikes can damage U.K’s economy.

This shows the fundamental difference in the economic approach of both countries.

After the GDP numbers, investors are now waiting for the UK employment and wage data to be released soon.

As the things stand, both the monetary policy maker in the U.S. and the U.K. both afraid that inflation can hit the market hard.

Hence, policymakers are already assessing their options.

As the Feds are ready to increase the interest further high, it is obvious that the U.S. dollar will outperform the GBP in terms of price.

On the other hand, the output of U.K’s manufacturing industry has decreased by 0.4%. This means U.K’s economic revival will be sluggish due to the steady growth rate.

For GBP to retain the current gain in its price the positive employment figures will be very important.