The pound rallied against the greenback Friday following the release of better-than-anticipated GDP data for January. The pound’s uptrend also gained momentum in the US session after the release of mixed employment data and the collapse of two US banks in a span of 48 hours. Overall, the GBP/USD pair rallied from a low of 1.1907 to a high of 1.2114.
According to the UK Office for National Statistics, the country’s economy expanded 0.30% m-o-m in January following a GDP contraction of 0.50% in the previous month and a greater than 0.10% rise forecast by economists. The GDP remained flat. In the three months that ended January 2023, compared with the previous three months.
The services sector expanded by 0.50% in January after declining by 0.80% in the previous month. The increase was led by education, transport and storage, human health activities, and arts, entertainment, and recreation activities. Output in consumer-facing services inched up 0.30% in January. In the previous month, consumer-facing services posted a decline of 1.20%.
Production output dipped 0.30% in January following a 0.30% rise in December.
The ONS also stated that construction output (in volume terms) fell by 1.70% m-o-m in January after remaining flat in December. Economists did not anticipate any change in the construction output. The reported figure reflects the worst construction sector growth figure since June 2022.
In the three months that ended January, construction sector output posted a decline of 0.70%. Notably, the UK construction sector posted four consecutive quarters of growth.
The decline in construction output was led by a 4% drop in new work, partly offset by a 2% rise in repair and maintenance. Five out of nine sub-sectors recorded a decline in January.
The UK trade deficit narrowed to £5.86 billion in January from £7.15 billion in December as imports and exports fell by 6.30% and 5.10%, respectively. Specifically, goods imports declined 8.70% in January. Likewise, goods exports decreased by 1.80%.
In a separate news release, the UK Office for National Statistics stated that the country’s manufacturing output declined by 0.30% in January following a 0.30% increase in December. Economists did not anticipate any change in production output. Also, at the end of January, monthly production output stood 1.70% below February 2020 levels. Furthermore, production output for the three months ended January grew by 0.30% compared with the previous three months ended October 2022.
The decline was led by two of the four production sectors. While mining and quarrying fell by 2.20% and 0.40%, respectively, water supply and sewerage, electricity, and gas posted an increase of 0.60% and 0.50%, respectively.
According to the US Bureau of Labor Statistics, the country’s non-farm sector added 311,000 jobs in February, following an addition of 504,000 jobs in the previous month. Economists had anticipated non-farm payroll employees to increase by 224,000. The average monthly gain was 343,000 jobs over the last six months.
Leisure and hospitality added 105,000 jobs in February. Likewise, retail trade added 50,000 jobs. While government employment rose by 46,000, professional and business services posted an increase of 45,000. Healthcare added 44,000 jobs in February. Similarly, construction employment increased by 24,000. However, the information technology sector lost 25,000 jobs. Also, transportation and warehousing posted a decrease of 22,000 jobs.
The US unemployment rate inched up to 3.60% in February from 3.40% in January. Economists did not anticipate any change in the unemployment rate.
The labor force participation rate stood almost unchanged at 62.5%. Similarly, the employment-population ratio was unchanged at 60.20%.
The impressive UK GDP growth in January, the unexpected rise in US unemployment, and the collapse of two banks in 48 hours are expected to keep the greenback weak against its peers, including the pound.
The historical price chart indicates that the GBP/USD pair is trading above its 50-day moving average while the momentum indicator is rising. The currency pair is also ascending after testing the support at 1.1960. The next resistance is anticipated only near 1.2265. Therefore, we anticipate the GBP/USD pair to remain in an uptrend in the short term.
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