GBPUSD will move with the US PCE pricing data release as analysts continue to price the inflation data to the Federal Reserve’s plans.
The dollar was boosted on Thursday by releasing a solid GDP number for Q4.
GBPUSD – Daily Chart
GBPUSD has been strong after the Federal Reserve began its rate hike slowdown. Still, the pound sterling may be overvalued due to the recession expectations for the UK.
We can see on the Fibonacci chart that the GBPUSD has support from 1.12 to 1.16. These should be used as a guide for weakness in the pound.
The US economy surprised markets with another strong GDP figure, despite higher borrowing costs and inflation dragging on consumers. According to official statistics, the economy grew at an annual rate of 2.9% for the last three months of 2022. That was down from 3.2% in the previous quarter, with home sales and construction falling.
This has analysts concerned that the US economy is headed for recession. However, the Bank of England has warned of a protracted recession in the UK. The continued inflationary pressures in the UK will have supported the British pound. Still, it may be time for a correction.
The US unemployment rate has remained strong near historic lows, but other areas of the economy have weakened. In December, usually a strong period for consumer spending, retail sales dropped 1.1% from a month earlier.
Manufacturing has also been under pressure. Thursday’s report showed housing investment has fallen at an annual rate of nearly 27% in the three months to December, driven by declines in the construction of new homes.
The US economy will see the release of PCE numbers on Friday, with the core number predicted to fall to 4.4% from 4.7%. Michigan consumer sentiment is also expected to improve to 64.6 from 59.7.
