Pound Sterling Rallies on Upbeat UK Data, Soft US Dollar

: George Solotarov; 04 April 2024; Hits: 156

GBP/USD: Pound Sterling Rallies on Upbeat UK Data, Soft US Dollar

The Pound Sterling (GBP) is extending its recovery, reaching a one-week high above 1.2660 early Thursday. Positive economic data from the United Kingdom signals a potential return to growth after the technical recession in late 2023. A weakened US Dollar, spurred by the disappointing US ISM Services PMI, adds further bullish momentum to the GBP/USD pair.

UK Economy Shows Signs of Recovery

The UK Manufacturing PMI unexpectedly expanded in March, marking its first growth reading in 20 months. This expansion, fueled by domestic demand, fostered business optimism, which reached its highest level since April 2023. Additionally, British house prices climbed 1.6% in March, the strongest pace since December 2022, suggesting a resilient real estate sector despite elevated interest rates.

BoE Survey Points to Cooling Inflation

The Bank of England (BoE) Decision Maker Panel (DMP) survey for February revealed that most firms anticipate slower selling price and wage inflation in the coming year. Selling price expectations fell to 4.1% from 4.3%, the lowest reading in over two years. Wage growth expectations moderated to 4.9% on a three-month moving average, down from February's 5.2%.

Technical Outlook: GBP/USD Bulls Gain Strength

The Pound Sterling has rebounded to a one-week high near 1.2660 after finding buying support at a six-week low of 1.2540. The pair's winning streak extends into a third day, with bulls maintaining momentum after respecting the 200-day Exponential Moving Average (EMA) at 1.2566. The 20-day EMA near 1.2660 could pose a near-term resistance barrier.

Further support may be found at the December 8th low of 1.2500, while upside may be capped around the eight-month high of 1.2900.

The 14-period Relative Strength Index (RSI) rebounds above 40.00, but a decisive break above 60.00 is necessary to confirm a bullish reversal.