- Sterling of the pound has made progress as the UK's GDP rose at a robust pace in December and an astonishing expansion in the last quarter.
- Boe's Greene and Pill have led a gradually more cautious approach to interest rate reductions.
- Investors are volatility as the US president is poised to announce mutual tariffs.
Pound Sterling (GBP) approaches a psychological resistance of 1.2500 against the US dollar (USD) during European trading hours on Thursday. The GBP/USD pair will be strengthened as positive developments in peace negotiations between Russia and Ukraine overcome the impact of US (US) Consumer Price Index (CPI) data announced in January, announced on Wednesday. The Reserve (Fed) keeps interest rates at current levels for a long time.
US President Donald Trump confirmed on Wednesday that Russian leader Vladimir Putin and Ukrainian President Voldymir Zelensky had expressed their desire for peace in separate calls. He also ordered his top officials to launch a ceasefire talk, Reuters reported. This scenario has increased investors' risk appetite and reduced demand for safe inventory assets such as the US dollar. The US Dollar Index (DXY), which measures the value of greenbacks for six major currencies, slides to near 107.50.
US annual headline inflation accelerated to 3% in January, with estimates and 2.9%. Core CPI inflation, which excludes volatile food and energy prices, has grown at a rate of 3.3%, surprisingly, faster than 3.2% in December. Higher than expected inflation data forced the June meeting to cut stakes to support the Fed's interest rate cuts. According to the CME FedWatch tool, the chances of the Fed reducing interest rates in June are 36%, down from 50% on Tuesday.
Going forward, the next trigger for the US dollar is President Trump's decision on mutual tariffs, which he is expected to impose on Thursday. The White House said Wednesday that Trump could announce his mutual tariff plans before meeting with Indian Prime Minister Narendra Modi on Thursday, CNBC reported. Trump's mutual tariff announcement could once again increase the US dollar's safe haven appeal.
In terms of economic data, investors will be released at 13:30 GMT, focusing on US Producer Price Index (PPI) data in January.
Daily Digest Market Movement: Pound Sterling will increase significantly with bright UK GDP data
- Poundsterling will be bolstered in Thursday's European session due to multiple tailwinds, including bright UK (UK) data and a risk-on market mood. The UK National Statistics Office (ONS) reported that UK gross domestic product (GDP) rose at a fast pace at 1.4% in the last quarter of 2024. Quarterly revised upwards from 0.9%.
- Quarterly, the UK economy grew by a surprising 0.1% after maintaining its flat in the July-September period, but was expected to sign at a similar pace. During the month of the month, the UK economy grew at a robust pace of 0.4% in December.
- UK GDP data was better than expected in December and the last quarter of the previous year, but the Bank of England (BOE) cut its GDP forecast by 0.75%, providing sustainable support for UK currencies It's rare. At last week's monetary policy meeting, the central bank cut its borrowing rate to 25 basis points (BPS) to 4.5%, paying the guiding attention to interest rate reductions.
- BOE officials have led a cautious approach to interest rate reductions, as they are concerned about the mild persistence of inflationary pressures. BOE chief economist Huw Pill said central banks need to move cautiously towards further policy easing as the battle against inflation is not over.
- “We have been successful – not yet complete – able to remove some of the restrictions we have placed due to the developmental process,” Reuters reported. Therefore, it is not possible to “actively reduce interest rates.”
- On Wednesday, BOE policymaker Megan Greene supported a “cautious and progressive approach to interest rate reductions” as she believes inflation persistence is unlikely to decline on its own.
- Meanwhile, UK factory data remained stronger than expected in December. Monthly industrial production increased by 0.5%, faster than the 0.2% estimate. Manufacturing production was expected to increase by 0.7%, but decline by 0.1%. In November, both industrial and manufacturing production fell.
Technical Analysis: Pound Sterling regains 50 days of EMA
Sterling in the pound surged to nearly 1.2500 against the US dollar, revisiting the 50-day index moving average (EMA) of European trading hours on Thursday after indecisiveness on Wednesday. Daily proximity beyond the 50-day EMA indicates that the short-term trend is no longer bearish.
The 14-day relative strength index (RSI) oscillates within the range of 40.00-60.00, suggesting a lateral trend.
Looking down, January 13th Low on 1.2100 serves as the pair's important support zone. As an advantage, the high of 1.2607 on December 30th serves as a critical resistance.
