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January GDP Data Supported Pound Quotes

3/13/2023 11:01 AM

The GBP/USD pair is trading with upward dynamics, testing the level of 1.2125 for a breakout and updating local highs from February 28, taking advantage of some weakening of the dollar after the publication of the February report on the US labor market last Friday. The number of Nonfarm Payrolls in February increased by 311.0 thousand after rising by 504.0 thousand in the previous month, and the Unemployment Rate rose from 3.4% to 3.6%, while the Average Hourly Earnings adjusted from 0.3% to 0.2%. The market reacted to the release of the report with a decrease, probably counting on more optimistic signals that would allow the US Federal Reserve to act more aggressively.

In turn, the pound was supported by the data on Gross Domestic Product (GDP) for January. The UK economy showed growth of 0.3% after shrinking by 0.5% in the previous month, while analysts had expected growth of only 0.1%. At the same time, Manufacturing Production volumes for the same period decreased by 0.3% after an increase of 0.3% in December, while the forecast was at -0.2%, and in annual terms, the figure was -4.3% after -4.0% in the previous month. In turn, the volume of construction decreased by 1.7% instead of the projected 0.1%, and Industrial Production fell by 0.3% instead of 0.1%. Nevertheless, investors hope that the country will avoid recession in the near term, which was confirmed by Treasury Secretary Jeremy Hunt, who noted that the UK economy was stronger than expected. However, according to the official, there is still a long way to go for its full restoration.

Tomorrow, investors are waiting for the publication of a report on the UK labor market for January-February, where Average Earnings Including Bonus in January may decrease from 5.9% to 5.7%, and the indicator Excluding Bonus may decline from 6.7% to 6.6%, while the Unemployment Rate could correct from 3.7% to 3.8%.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range expands, freeing a path to new local highs for the "bulls". MACD indicator is growing preserving a stable buy signal (located above the signal line). The indicator is about to test the zero level for a breakout. Stochastic shows more confident growth, but at the moment it is located in close proximity to its highs, indicating the risks of the pound being overbought in the near future.

Resistance levels: 1.2140, 1.2176, 1.2236, 1.2292. | Support levels: 1.2054, 1.2000, 1.1933, 1.1875.

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