British pound dips after soft GDP

The British pound is almost unchanged on Friday and is trading at 1.2116 in the North American session.

UK avoids recession

UK GDP declined 0.5% in December, following a 0.1% gain in November and worse than the forecast of -0.3%. GDP managed a 0% growth rate in Q4 after a -0.2% reading in Q3. This meant that the UK managed to avoid a technical recession by a whisker. The real story, however, is about growth – or to be more precise, the lack of growth by the UK economy. The outlook for the economy is grim and high inflation is only compounding matters. Consumers and businesses are being squeezed by rising interest rates and high inflation, although at least inflation is slowly receding.

GBP/USD jumped over 1% on Thursday, albeit briefly, after BoE member Haskel testified before a parliamentary committee. Haskel had a hawkish message, saying that “inflation is more persistent than we expected” and that the Bank would “act forcefully if necessary”.  The markets zoomed in on the term “forcefully”, which the central bank omitted in the February rate statement. This was seen as a signal that the BoE might ease the pace of rate hikes to 25 bp at the next meeting. Haskel’s use of the term renewed talk that a 50-bp move was next and the pound responded with sharp gains. The next policy meeting is on Mar. 23.

US unemployment claims climbed from 183,000 to 196 thousand above the consensus of 190,000. Still, this marked a fourth week of claims below the 200,000 level. The four-week moving average, which smooths out much of the week-to-week volatility, actually edged lower to 189,250. This is an indication that the labour market remains tight, despite reports of mass layoffs by Amazon, Facebook and other large companies. The resilient labour market has enabled the Federal Reserve to continue raising rates, although there are signs that rising rates have dampened economic activity.


GBP/USD Technical

  • There is resistance at 1.2173 and 1.2297
  • 1.2052 and 1.1958 are providing support

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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, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.