The Pound Sterling (GBP) is facing a correction following mixed factory data from the United Kingdom Office for National Statistics (ONS) for November. While monthly growth in the manufacturing sector slightly exceeded expectations, the annual data fell short. Overall economic data, although slightly better than expected, has failed to alleviate concerns about a potential technical recession in the UK.
Looking ahead, the Pound Sterling’s performance will be influenced by upcoming labor market and inflation data scheduled for release next week. Deteriorating labor market conditions and a further decline in price pressures could strengthen expectations of a dovish interest rate outlook from the Bank of England (BoE) in its first monetary policy announcement of 2024 on February 1.
Despite these concerns, the Pound Sterling currently benefits from improved market sentiment. The GBP/USD pair remains on a bullish trajectory, supported by the likelihood of an interest rate cut from the Federal Reserve (Fed) despite a stable United States Consumer Price Index (CPI) report for December.
From a technical perspective, the Pound Sterling is pressuring the two-week high around 1.2790. The broader appeal for the GBP/USD pair remains positive as the 20 and 50-day Exponential Moving Averages (EMAs) are sloping higher. The focus is on sustaining above the 61.8% Fibonacci retracement at 1.2710 (of the move from July 13, 2023, high at 1.3142 to October 4, 2023, low at 1.2037).
The 14-period Relative Strength Index (RSI) is attempting to break above 60.00, signaling potential bullish momentum if successful. Traders will closely monitor technical levels and upcoming economic data for further cues on the Pound Sterling’s direction in the near term.
