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GBP Under Pressure

Following a sharp break higher on Friday, GBPUSD has since run into heavy selling pressure and is now fast approaching a full reversal of last week’s gains. The shift in sentiment comes on the back of a report earlier in the week suggesting that the UK is already in recession. Bloomberg ran a story claiming that their analysis suggests a 52% chance of a recession in the UK this year. In recent months we’ve heard the NIESR sharing its projections of a more than 60% chance of a UK recession next year.
 

UK GDP Due Friday

On the back of these headlines earlier in the week, traders are now bracing for Friday’s UK GDP results. The quarterly figure is pegged to fall to -0.1% from 0.2% prior, paving the way for a technical recession if Q4 data comes in negative also.
 

Further Hikes Still Possible

Commenting last week, BOE governor Bailey warned that the BOE still had a way to go on inflation, pushing back against growing market bets on expected BOE cuts. With inflation still elevated and rates at risk of moving higher, the growth outlook remains dim for the UK which should remain a headwind to GBP in coming months.
 

Technical Views

GBPUSD

(Click on image to enlarge)

The breakout above the bear channel saw GBPUSD running into firm resistance at the 1.2437 level. Price has since turned lower from there and focus now will be on the 1.2171 level and the retest of the broken bear channel highs. Bulls need to defend this area to keep upside hopes alive. Below there, 1.1843 is the next support to note. 

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