British economic data were disappointing, but the Sterling rose against USD due to the weaker Dollar. After the slower-than-expected manufacturing Purchasing Managers Index last week, slower industrial and manufacturing productions also confirmed the slower pace of economic growth. Industrial Production fell by -0.2% in February, while the market was expecting a 0.2% rose. Unlike the predicted growth of 0.2%, manufacturing production in February was also unchanged. The slower production pace is also reflected in February GDP, with 0.0% growth against 0.1% expectations.
We had mixed data from the US inflation condition on the other side of the Atlantic Ocean. US CPI in March without seasonal adjustment eased to 5% annually, lower than market expectations of 5.2% and 6.0% in February. The increase was moderate for nine straight months and marked the slowest pace of growth since April 2021. Compared with the previous month, the seasonally adjusted CPI increased only 0.1%, which was also lower than the market expectation of 0.2% and 0.4% growth in February. The concern was the core CPI number. Excluding volatile energy and food prices, inflation raised by 5.6% year-on-year, in line with market expectations, and higher than 5.5% in February. On the monthly scale, Core CPI recorded 0.4%, which was also in line with market expectations and lower than February’s 0.5%.
These data show that inflation remains too hot and worrying. However, we still progressed in the inflation-controlling process. The core CPI has been above 5% on a year-over-year basis for 16 consecutive months, and over the first three months of 2023, core consumer prices have been rising. Energy and used vehicle prices have fallen over the past year, and with another 25 bps rate hike expectations in Fed’s next meeting on May 3, we can be optimistic about the inflation fall.
Overall, the published data could not help their relative currencies; neither US nor UK data confirms the strength of their economy, which can support the currency in the long term. US inflation numbers told us that Fed could end the rate hike cycle after only one more rate hike, which increased the pressure on the USD, and this pressure on US currency was more than the adverse effects that UK data could have on the Sterling.
From the technical point of view, GBPUSD moves in a clear uptrend with the following targets at 1.264 and 1.296 as the first and second resistance in the Daily chart. Breaching under second support at 1.1923 will change the market trend to bearish. 1.2327 is the first support and breaching under this level, which can open the door for 1.1923.
