On Monday, in the Asian trading the GBPUSD pair dropped to the 1.2870 region but then recovered and managed to close the day in the green near the 1.2915 mark. The major opened Tuesday around these levels and later hit session tops in the 1.2940 area, however was unable to hold here and lost about 15 pips.
Today, the UK released a bunch of reports including the Trade Balance, the Gross Domestic Product, the Industrial and the Manufacturing Production. And though the reading for the fourth quarter 2019 UK GDP was flat (0.0% vs. +0.4% previous), the MoM figures bettered the expectations and arrived at +0.3% vs. +0.2% forecasted and -0.3% last. Thus, the report showed that the British economy managed to avoid contraction. Certainly, the current quarterly growth was weaker than the previous result while the rise in December may be in part explained by the optimism due to Johnson’s success in the election.
The UK also revealed its factory activity data. And though the monthly Manufacturing Production was a bit below consensus and came at +0.3% m/m versus +0.5% m/m expected, the reading was much higher than the prior -1.7%. Such more or less decent figures helped the Cable to go up and refresh session highs at 1.2940. However, due to some negative factors, the pair lost its traction here and staged a modest pullback.
First of all, the markets are still concerned over the so-called hard Brexit – they fear that after the end of the transition period the UK and the EU won’t be able to come to a trading agreement as two sides have significant differences in their views on the future relationship. This uncertainty weighs on the pound and prevents investors from placing aggressive bets.
Further, the US Treasury bond yields keep on marching north amid reset in the global risk sentiment. And though the Chinese coronavirus has already claimed lives of more than 1000 people and there’s still no efficient vaccine for the epidemic, the traders seem to put up with the situation and prefer the risk assets to the safe-havens. This supports the US Dollar and puts a lid on further major’s rally.
From the technical point of view, the GBPUSD pair sticks to its daily range of 1.2910-1.2940 and changes gains with losses. And while the pair keeps on trading below its SMA200 on the 1-hour chart the bearish trend remains unchanged. The support is seen at $1.2870, $1.2830 and $1.2770 while the resistance lies at $1.2955, $1.3000 and $1.3070. Despite today’s recovery, the bears will likely keep the situation under their control as the concerns over the hard Brexit are far from being dissolved yet.