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GBP/USD climbs sharply, back above 1.2380 as traders eye US GDP

  • GBP/USD bounces off weekly lows and reclaims 1.2300 on a soft US Dollar.
  • The Producer Price Index in the UK cools down, sparking speculation that the Bank of England could tighten but not as aggressively as foreseen.
  • Thursday’s US economic docket would feature GDP, unemployment claims, Durable Good Orders, and core PCE.

The GBP/USD solidly climbs and trims two days of consecutive losses after hitting a weekly low of 1.2263 on Wednesday. Risk aversion is the game’s name, while the US Dollar (USD) is pairing some of its earlier losses, underpinned by US bond yields rising. The GBP/USD is trading at 1.2384, clinging to gains of 0.42%.

UK's Producer Price Index eases, ahead of the BoE's next week meeting

During the European session, the GBP/USD slid to the lows of the day at 1.2282 amidst news that the UK’s Producer Price Index (PPI) for December cooled the most since April 2020, which would ease pressures for the Bank of England (BoE). Input prices paid by factories dropped -1.1% MoM, while the year-over-year data dropped 1.5% from 18% to 16.5%. Regarding Output prices, it fell -0.8% MoM beneath estimates for a 0.1% gain, while on an annual basis, it fell to 14.7% from 16.2%.

Therefore, speculations that the BoE would reassess how much tightening is needed to curb inflation weakened the GBP/USD. Additionally, weaker than-estimated UK PMIs for December, revealed Tuesday, sparked recessionary fears.

Meanwhile, the greenback has continued to weaken across the G8 FX board, as shown by the US Dollar Index, down 0.15%, staying at 101.767. Contrarily, US Treasury bond yields, paired with earlier losses, sit at 3.465%.

Aside from this, traders are bracing for a busy Thursday’s round of US economic data to be unveiled. The US economic docket will feature the Advance in Gross Domestic Product (GDP) for Q4, expected at 2.6%. Further, Durable Good Orders are expected to recover to 2.5%, compared to last month’s -2.1% plunge. Unemployment claims for the last week would also be updated, along with the US Federal Reserve Core PCE inflation reading.

Therefore, with money market futures chances at 75% of witnessing a 50 bps rate hike at the BoE meeting, further GBP/USD upside is expected.

GBP/USD Key Technical Levels

GBP/USD

Overview
Today last price1.2382
Today Daily Change0.0047
Today Daily Change %0.38
Today daily open1.2335
 
Trends
Daily SMA201.2174
Daily SMA501.2132
Daily SMA1001.1741
Daily SMA2001.1972
 
Levels
Previous Daily High1.2414
Previous Daily Low1.2263
Previous Weekly High1.2436
Previous Weekly Low1.2169
Previous Monthly High1.2447
Previous Monthly Low1.1992
Daily Fibonacci 38.2%1.2321
Daily Fibonacci 61.8%1.2356
Daily Pivot Point S11.2261
Daily Pivot Point S21.2187
Daily Pivot Point S31.211
Daily Pivot Point R11.2412
Daily Pivot Point R21.2488
Daily Pivot Point R31.2562

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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