GBP / USD: Great Britain is one step away from recession. Future outlook of the British pound movement

The British pound has once again tested the strength of the support level of 1.2922, which did not withstand the pressure after the release of disappointing fundamental statistics on the state of the UK economy, which continues to slow against the background of a number of political and economic events.

According to the report, the UK GDP grew by only 0.7% on an annualized basis in the 4th quarter of 2018 against the 2.5% growth in the 3rd quarter. As for December, the economy shrunk by 0.4% compared in November, which indicates an approaching recession.


It should be noted that the fall of WFP is directly related to the fact that a number of UK companies reduced investment in front of a serious problem, about which only lazy people are not talking recently (which of course refers to Brexit). The growing uncertainty regarding the country's withdrawal from the European Union and the likelihood of indiscriminate exit makes the outlook of not only companies but also consumers to be more cautious in the future, which affects mood and spending. The reduction in investment in 2018 was 0.9%, and this is the strongest drop since 2009 after the financial crisis.

The National Bureau of Statistics of Great Britain also noted that the Gross Domestic Product grew by only 1.4% in 2018 compared with the previous year, which is the weakest indicator since 2012.

Against this background, the decline in the UK industrial production does not seem so serious contrary to economic growth forecasts.

According to the data, the industrial production in the UK decreased immediately by 0.5% in December 2018 compared in November and fell by 0.9% versus December 2017. Economists had expected a 0.2% increase in production. November data were revised to -0.3% and -1.3%, respectively.

A serious reduction was also noted in the manufacturing industry, where production fell immediately by 0.7% in December and by 2.1% compared with December 2017. Economists had expected a 0.4% increase in manufacturing.

Without surprise, data on the growth of the UK foreign trade deficit were also perceived.

According to the report, the deficit of foreign trade in goods in the UK amounted to 12.1 billion pounds in December, while it was projected at 12.0 billion pounds. The UK trade deficit with non-EU countries in December was at 3.6 billion pounds.

As for the technical aspect of the GBP/USD pair, surprisingly a serious collapse of the pound did not happen, although important support levels were broken. As long as trading is below the 1.2920 range, pressure on the trading instrument will continue and a breakthrough in the minimum of 1.2890 may lead to a larger sale of the pound with access to the support of 1.2810 and 1.2760.

Having fixed above the resistance of 1.2940, if the bulls return the market position then the trade will move to the side channel with the upper border of 1.3000 and support in the area of 1.2850.

The material has been provided by InstaForex Company -