Pound edges higher ahead of GDP

The pound started the week quietly and this has continued on Tuesday. In the North American session, GBP/USD is trading at 1.3241, up 0.24% on the day.

The UK will release Final GDP for Q3 on Tuesday. The report is unlikely to shake up the pound, as Final GDP is expected to confirm the initial estimate of 1.3%, m/m. On an annualized basis, GDP is expected to confirm the initial estimate of 6.6%. This high figure should be taken with a grain of salt, as it is in comparison with the Q3 data of 2020 when the economy was in the throes of Covid.

Investors are more focused on the surge in Covid cases, as the Omicron variant continues to rage across the UK. The hospitality sector has been hard hit by cancellations as people opt to stay home and avoid going out. With this latest wave of Covid occurring at the busiest season for businesses, the economic toll is sure to be reflected in poor fourth-quarter numbers.

The BoE again surprised the markets last week, as the bank raised rates from 0.10% to 0.25%. The bank had held rates at the record-low level of 0.10% since March 2020, as part of the emergency policy put in place to combat the Covid pandemic. The hike was significant in being the first time a major central bank has raised interest rates during Covid. However, any thoughts that the hike would give a strong boost to sterling failed to materialize, for two reasons. First, the size of the hike is quite small – just 15 bps. Second, with risk sentiment in low gear, the US dollar remains the currency of choice for investors who have little appetite for risk as Omicron rages across Europe and is likely to do the same in the US.

.

GBP/USD Technical Analysis

• GBP/USD has support at 1.3190 and 1.3116
• There is resistance at 1.3314 and 1.3364

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.