The UK Office for National Statistics (ONS) reported that the economy contracted in the fourth quarter of 2023, sending the pound sterling under on Thursday. The GBPUSD currency pair was down by 0.25% to trade at 1.2609 at 0815 GMT as traders positioned themselves for the US GDP figures. The pound’s downside against the US dollar seems almost certain as the US economy is projected to have grown in Q4 of 2023.
ONS reported that the UK’s economy declined by 0.2% YoY, meeting the forecast figure. In addition, the contraction was 0.3% more than the third quarter of the year, confirming the UK’s technical recession. The BoJ is expected to announce three interest rate cuts in 2023, and the confirmation of the technical recession builds a strong case for the cuts. This will add to the downward pressure on GBPUSD in the near term.
Meanwhile, the US GDP figures will be released on Thursday. The Q4 2023 is forecast to have grown by 3.2%, a significant decline from the previous quarter’s 4.9%. Besides the GDP figures, the US initial jobless claims data will be out, and could inject more volatility into the cable. The reading is expected to show a slight growth to 212k claims from 210k. Furthermore, the Chicago PMI data will come into play later in the day, adding to the multiple scenarios that could play out for the GBPUSD trading pair.
Technical analysis
The GBPUSD trading pair faces resistance at the 1.2640 pivot mark. The downward trajectory is likely to continue as long as the sellers keep the action below the pivot. The first support at 1.2605 could be broken if the sellers extend their control, upon which the next target will be at 1.2590. However, a move above 1.2640 will favour the buyers to break the resistance at 1.2655. The resultant momentum will invalidate the downside view and potentially see movement to test 1.2670.
