Pound yawns after UK GDP as expected

The pound is slightly lower on Friday, after taking investors on a roller-coaster ride a day earlier. GBP/USD was up over 100 points on Thursday after the US inflation report, but the pound surrendered almost all of these gains later in the day.

The UK treated the markets to data dump on Friday, but the pound shrugged. The key release, quarterly GDP, was within expectations, was unchanged at 1.1% in Q4 q/q (1.0% est.). Investors didn’t flinch as GDP fell by 0.2% in December, as health restrictions in response to Omicron took a toll on consumer spending during the holiday season. Manufacturing Production climbed 1.3%, shy of the estimate of 1.7% but a strong improvement from the previous read of -0.1%.

FOMC member Loretta Mester said on Wednesday that the Fed needed to act to tame inflation, but she didn’t see a compelling case to raise rates by a half-point at the March meeting. The markets disagree, however, and are bracing for a half-point move. CME’s FedWatch indicates has gauged the likelihood of a 0.50% hike at a whopping 96%, up from just 33% earlier in the week, before the hot US inflation report.

Inflation, oil prices could spell trouble for Biden

The highly anticipated US inflation reading did not disappoint, coming in a 7.5% y/y for January. This beat the forecast of 7.3% and was up from 7.0% in December. Supply disruptions continue to persist, and if the Ukraine/Russia conflict worsens, oil prices could climb towards the USD 100 dollar level. Higher inflation and rising oil prices could spell big trouble for President Biden, as frustrated voters could voice their anger in the US midterm elections in November. The ray of light for Biden is if a deal is reached with Iran in the nuclear talks, which would release Iranian oil into the world markets.

 

GBP/USD Technical Analysis

  • GBP/USD is putting pressure on resistance at 1.3642. Above, there is resistance at 1.3756
  • There is support at 1.3400 and 1.3272

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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