- GBP/USD is moving steadily towards the confluence/20-50 DMA around 1.2110.
- US industrial production surprises to the upside, while housing data continues to deteriorate.
- Employment figures in the UK were better than expected, reinforcing the case for a 50 basis point Bank of England rate hike.
The GBP/USD It breaks three days of losses and approaches 1.2100 as the USD begins to weaken, in the middle of the American session, courtesy of recession fears resurfacing with US data showing signs of economic slowdown.
GBP/USD is trading at 1.2081, having hit a daily low of 1.2007, during the European session, but recovered on modest UK jobs numbers and reclaimed the 1.2050 area.
In terms of data, the US Federal Reserve reported that July industrial production rose 0.6% mom, supported by motor vehicles, driven by easing supply chain disruptions. Prior to the Wall Street open, July home building permits and housing starts plummeted, signaling the continued deterioration of the housing market, spurred on by rising mortgage rates.
In addition, the New York Fed’s Empire State Manufacturing Index for August fell into contraction territory on Monday, coming in at -31.1, below the 5 estimate.
GBP/USD reacted to this, breaking above the 20-day EMA, extending its gains and reaching a daily high at 1.2117.
On the UK side, the employment data was better than estimated, with a change in the applicant count, which fell by 10,000, better than the estimated 32,000, while the unemployment rate stood at 3.8 %. Despite data showing signs of a robust labor market, the Bank of England is expected to raise rates at its next meeting by 50 basis points, ignoring projections that the UK economy could slip into recession. by the end of the year.
On the other hand, the political spectrum has not been a driver of the British pound. However, the upcoming elections in September could increase the volatility in GBP/USD, and depending on who is elected as Prime Minister, we will probably see the first reaction of the pair.
What must be considered
On Wednesday, the UK economic calendar will see the release of the Retail Price Index and consumer and producer inflation figures. In the United States, retail sales for July will be published, along with the Minutes of the last FOMC meeting and the Fed’s speeches.
GBP/USD key technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
