- GBPUSD attracts some buying near the 1.1650-1.1645 area, although it lacks continuation.
- The dollar is weakening near a two-month low and continues to lend some support to the pair.
- Better than expected UK macro releases fail to impress bulls or provide any impetus.
The pair GBPUSD reverses an intraday drop to the 1.1650-1.1645 area and rises to the upper end of its daily range at the start of the European session. The pair remains stable above the 1.1700 levelor a nearly two-month high, and moves shortly after the release of UK macroeconomic data.
The UK Office for National Statistics reported this Friday that the national economy contracted 0.6% in September, vs. -0.4% estimate and -0.3% prior. The disappointment, however, was offset by better-than-expected data in the third quarter, which showed a 0.2% contraction in the July-September period. Also, the annual growth rate, which stood at 2.4%which together with UK manufacturing and industrial production, which beat market expectations, and offers some support to the pound sterling.
On the other hand, the US dollar is struggling to build on its modest intraday rally and is weakening near its lowest level since August 26, touched after a softer US CPI report on Thursday. This is seen as another contributing factor in limiting the downside of the GBPUSD pair. That said, the Bank of England’s warning about a prolonged UK recession is preventing bulls from opening aggressive positions and acts as a headwind to the pair, at least for the time being.
Therefore, it will be prudent to wait for strong continuation buying before traders begin to position themselves for an extension of the recent strong recovery move from a multi-year low hit in September. Traders now await the US economic docket, in which the Preliminary US Consumer Sentiment Index for Michigan will be released. This, coupled with US bond yields and general market risk sentiment, will influence dollar price dynamics and provide some momentum to GBPUSD.
GBPUSD technical levels
Source: Fx Street
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