Market Analysis

Sterling boosted as UK macro data reduces recession fears

The British pound is holding firm above the 1.2300 level against the US dollar after recent positive UK macroeconomic data and a reduction in hard-Brexit fears. Sterling trades towards its highest level since late-July this year as investors breathed a sigh-of-relief over recent UK growth data, which pushed-aside recessionary fears.

The United Kingdom economy also released impressive wage data earlier this week, which showed a surprise jump in average earnings. UK earnings including bonuses far outpaced expectations, hitting four percent, which was officially the highest increase in wages since the depths of the financial crisis of 2008.

Investors also cheered strong monthly UK GDP data, which showed a 0.3 percent rise in growth, marking the strongest GDP numbers since the first month of 2019. The data helped to off-set fears of a fourth-quarter rate cut from the Bank of England, if a Brexit deal if eventually struck, as the underlying fundamentals behind the UK economy remain strong.

With Boris Johnson’s no-deal Brexit scenario being voted-down in UK Parliament, alongside a vote for a general election next month, investors are feeling more confident that the British PM will seek to deliver an improved Brexit deal. PM Johnson is currently working hard to find a resolution to the Northern Ireland backstop issue, which could place him a stronger position when he negotiates with EU officials.

PM Johnson will shortly be heading to Brussels, this is likely to provoke more volatility in the British pound. Traders will also have to contend with the Bank of England policy meeting next week, which theoretically could be the penultimate rate decision rate before the United Kingdom’s planned departure from the European Union, on October 31st.


GBP/USD Daily Candlestick Chart| Source: ActivTrader

GBP/USD Daily Candlestick Chart| Source: ActivTrader

The British pound still has scope to trade even higher against the U.S Dollar according to a bullish pattern on the lower time frames. The pattern suggests that the GBP/USD pair can advance towards the 1.2480 level if bulls break above the 1.2400 level. Key technical support for the GBP/USD pair is currently located at the 1.2300 and 1.2240 level.


Written by Nathan Batchelor, External Analyst, ActivTrades

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.