The British pound has extended its gains and is trading at 1.1996 in Europe, up 0.62%. Earlier, GBP/USD pushed above the symbolic 1.20 level.
UK GDP rises 0.3%
The UK ended a light calendar week on a bright note, as January GDP posted a modest gain of 0.3%, above the estimate of 0.1% and following a -0.5% reading in December. The UK managed to avoid a recession in 2022, but there is uncertainty as to whether the economy can stay above water this year as well. Today’s GDP has provided a bit of optimism and the pound has responded with gains of 0.50%.
The Bank of England will be pleased with the improvement in GDP, as policymakers continue to grapple with stubbornly high inflation of 10.1%. The BoE has been aggressive in its battle to wrestle inflation lower, raising the cash rate to 4.00%. The results haven’t impressed, with inflation still in double digits.
The BoE holds its next meeting on March 23 and is widely expected to raise rates. The markets have priced at a peak rate of 5%, but there are calls for the central bank to ease up on its tightening. Swati Dhingra, one of nine members of the Monetary Policy Committee, said on Wednesday that further tightening was unnecessary as inflation is falling rapidly and that more rate hikes risked damaging the fragile UK economy.
GBP/USD Daily Chart
- GBP/USD has pushed above resistance at 1.1931. Above, there is resistance at 1.2037
- There is support at 1.1817 and 1.1711