GBP/USD Price Analysis – Sep 13, 2023

Daily Price Outlook

The GBP/USD currency pair failed to extend its previous day's gains and lost some of its traction in response to disappointing UK GDP data. As of now, the pair is down 0.14% on the day, trading at 1.2466. Furthermore, the ongoing strength of the US dollar has also played a major role in undermining the GBP/USD currency pair. Moreover, the GBP/USD currency pair faced some additional downward pressure due to expectations that the Bank of England (BoE) is approaching the conclusion of its rate-hiking cycle.

UK Economic Data and Its Impact on GBP/USD

According to the latest data from the Office for National Statistics (ONS), the UK's economy contracted by 0.5% in July, following a 0.5% growth in June. This was worse than the expected 0.2% decline. On another note, the Index of Services for July showed a 0.1% increase in a 3-month period, beating the estimated -0.1% and matching the previous month's performance.

As a result of this news, the GBP/USD pair is experiencing further losses. Currently, it's down 0.14% for the day, trading at 1.2466 marks.

On the other side, the UK's industrial sector slowed in July. Manufacturing output fell 0.8% MoM, beating expectations, but total industrial output was down 0.7%. Annually, manufacturing production exceeded expectations at 3.0%, while total industrial output slightly missed predictions at 0.4%. The UK's goods trade balance improved to GBP-14.064 billion, and the total trade balance (non-EU) was GBP-2.361 billion for July, an improvement from June.

Therefore, the information of a slowing UK industrial sector, despite some positive aspects, put downward pressure on the GBP/USD pair, contributing to its decline.

Fed's Policy Outlook and Its Impact on GBP/USD

Across the ocean, the Federal Reserve (Fed) is expected to take a break at its upcoming meeting, but there's still a chance of one more 0.25% rate hike this year. Recent positive US economic data suggests a strong economy and ongoing inflation could support higher rates. However, the focus is now on the US CPI report for hints on future rate hikes. Meanwhile, the possibility of higher US rates keeps Treasury bond yields up, benefiting the safe-haven US Dollar. This, coupled with market caution, limits significant gains for the GBP/USD pair.

GBP/USD - Technical Analysis

The GBP/USD currency pair has decisively breached the 1.2505 mark, evidenced by its recent daily close beneath this threshold. This move aligns with the bearish trajectory outlined within the analytical chart's bearish channel. Subsequent targets are delineated at 1.2400, extending further to 1.2310.

Given this context, a bearish orientation is anticipated for today's trading session, bolstered by the negative influence exerted by the 50-day Exponential Moving Average (EMA50). However, it's crucial to note that any ascent past the 1.2505 level, if sustained, might negate the current bearish perspective, paving the way for potential recuperative actions. For today, the projected trading spectrum spans from a support boundary of 1.2390 to a resistance cap of 1.2540.