Solid News

The UK Economy is Approaching a Recession

1/6/2023 1:00 PM

The GBP/USD pair is correcting at 1.1900.

The pound shows negative dynamics despite stable data on business activity: the composite PMI in December rose to 49.0 points from 48.2 points earlier, and the service PMI – went up to 49.9 points from 48.8 points for the first time since the beginning of the summer last year. Nevertheless, experts are confident that a recession in the national economy may come as early as the first quarter. Yesterday, the British Retail Consortium (BRC) reported that annual food prices in December added 13.3% compared to 12.4% last month. Thus, the consequences of the coronavirus pandemic and the ongoing military conflict in Ukraine, which acted as a catalyst for increased inflation, will contribute to an increase in interest rates by the Bank of England and a tight financial policy by the government.

After yesterday's publication of data on the US labor market, the US dollar returned to positive dynamics and is now around 104.800 in the USD Index, which was not observed for almost a month. Initial jobless claims amounted to 204.0K against 223.0K a week earlier and the projected 225.0K, which contributed to a decrease in the total number of citizens receiving assistance from the state to 1.694M people from 1.718M last week.

On the daily chart, the trading instrument is preparing to exit a long ascending channel, testing the support line.

Technical indicators maintain an increasing sell signal: the range of fluctuations of the EMA on the Alligator indicator is actively expanding downwards, and the histogram of the AO oscillator forms downward bars, falling in the sell zone.

Resistance levels: 1.2000, 1.2420. | Support levels: 1.1760, 1.1460.

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