Pound Sterling weakens as UK GDP and factory activity shrink in October

FUNDAMENTAL OVERVIEW:

• The Pound Sterling saw a sharp sell-off after data revealed an unexpected 0.1% decline in the UK’s monthly GDP for October.
• Industrial and Manufacturing Production also contracted compared to the previous month.
• Meanwhile, investors anticipate the Fed to halt its policy-easing cycle in January following an expected rate cut next Wednesday.

The Pound Sterling (GBP) dropped sharply against its major counterparts on Friday following a report from the UK Office for National Statistics (ONS) revealing unexpected contractions in monthly GDP and factory output for October. The economy shrank by 0.1%, matching September’s decline, defying economists’ expectations of a 0.1% expansion.

Both Manufacturing and Industrial Production fell by 0.6% month-over-month, marking the second consecutive monthly decline, contrary to forecasts of a rebound in factory output. Annually, Industrial Production decreased by 0.7%, while Manufacturing Production stagnated.

Following the release of the UK monthly GDP data, Goldman Sachs lowered its 2024 UK GDP growth forecast from 1.2% to 1%.

Investors should prepare for heightened volatility in the British Pound next week, with key events on the horizon. The UK employment data for the three months ending in October and the Consumer Price Index (CPI) data for November are set to be released. Additionally, the Bank of England (BoE) will meet on Thursday to decide on interest rates, with markets widely anticipating no change, leaving rates at 4.75%.

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GBP/USD TECHNICAL ANALYSIS H4 CHART:

Technical Overview:

GBP/USD is trading within a down channel.

GBP/USD is moving below all the Moving Averages (SMA).

The Relative Strength Index (RSI) is in a Neutral Zone, while the Stochastic oscillator suggests a Negative trend.

Immediate Resistance level: 1.2664

Immediate support level: 1.2635

HOW TO TRADE GBP/USD

After a significant rally, GBP/USD encountered resistance and reversed course. The pair experienced a sharp decline, piercing key support levels. While a brief recovery attempt was made, the price was ultimately rejected and is now consolidating near a critical resistance zone. A break below this level could trigger further downside potential.

TRADE SUGGESTION- STOP SELL – 1.2624, TAKE PROFIT AT- 1.2491, SL AT- 1.2710.