British Pound (GBP) Price Outlook: GBP/USD Sliding Towards Support as UK GDP Disappoints
GBP price, news and analysis:
- GBP/USD is edging closer to a support line connecting the lower lows in place on the daily chart since late May.
- It has not been helped by either a stronger US Dollar after yesterday’s hot US inflation numbers or by a mixed bag of UK GDP data released earlier in this session.
GBP/USD is edging lower towards support from the downward sloping channel that checks in currently around 1.3315. If that should break, the pair would be at its lowest level since late December last year.
GBP/USD Price Chart, Daily Timeframe (November 16, 2020 – November 11, 2021)
Source: IG (You can click on it for a larger image)
UK GDP disappoints
UK economic growth data released early in the London session have not helped GDP/USD but prompted only a limited reaction in the markets. On the plus side, GDP in September expanded by 0.6% month/month, above the 0.4% expected by economists. However, the preliminary figures for the third quarter showed a growth rate of just 6.6% year/year, below the forecast 6.8%. Industrial production and manufacturing output numbers were disappointing too.
Estimates for previous months’ GDP growth were revised lower as well, leaving GDP 0.6% smaller than it was in February 2020, shortly before the UK went into its first Covid-19 lockdown.
In addition, the US Dollar continues to benefit from US inflation data released Wednesday. These showed CPI at its highest for 30 years and inevitably boosted expectations that the Federal Reserve will tighten monetary policy sooner than most other major central banks.
Turning to the figures on retail traders’ positioning in GBP/USD, IG client sentiment data show 76.81% of traders are net-long, with the ratio of traders long to short at 3.31 to 1. The number of traders net-long is 26.08% higher than yesterday and 53.81% higher than last week, while the number of traders net-short is 30.37% lower than yesterday and 41.13% lower than last week.
Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.
-- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.