13.03.202310:56 Forex-elemzések és áttekintések: GBPUSD finds support in energy crisis and Brexit

In Forex, it is not a frozen picture—static—that is important, but dynamics. How do investors see the economy? Does it meet their expectations? What difference does it make that Britain's GDP is still 0.2% below the pre-pandemic level, and the American counterpart has long exceeded it, if this factor has already been taken into account in GBPUSD quotes? Another thing is when the latest data show that the UK economy looks better than expected, and the labor market and the U.S. banking system are cooling down. Then it's time to buy the pound against the U.S. dollar.

Due to the forecasts of the IMF, the Bank of England, and other reputable organizations, investors are used to seeing Britain in the black. Unlike other G7 countries, its economy has not returned to pre-pandemic levels. Along with the pandemic, it has taken hits from the armed conflict in Ukraine, the energy crisis, and Brexit. However, what once appeared to be a negative may end up as support. The agreement between London and Brussels on the terms of trade in Northern Ireland and the fall in gas prices in Europe by 90% from the peaks of summer 2022 have a stimulating effect on UK's GDP.

Dynamics of G7 economies

The figure rose 0.3% in January, exceeding Bloomberg's forecast, which along with accelerating business activity, allowed Prime Minister Rishi Sunak to declare that things were better than people had expected. That the basic fundamentals of the economy are strong. It remains to strengthen fiscal discipline, which Chancellor Jeremy Hunt is sure to do in an updated budget plan.

Importantly, Britain is likely to avoid a recession, even though the Bank of England predicted a five-quarter recession. This allowed the futures market to raise the expected repo rate ceiling from 4.6% to 4.75%, which helped strengthen the sterling.

The expected peak of the federal funds rate after the publication of statistics on the U.S. labor market for February and the announcement of the bankruptcy of the Silicon Valley Bank (SVB), on the contrary, fell sharply from 5.5% to 5%, which weakened the U.S. dollar. Despite the growth in employment by 311,000, the unemployment rate increased from 3.4% to 3.6%, and the growth rate of average wages slowed down to 0.2% MoM.

Dynamics of U.S. Non-Farm Employment

Thus, the British economy is looking better than previously expected, allowing investors to expect higher rates from the Bank of England. In contrast, the U.S. economy is not doing as well as expected based on January statistics. This may lead to a recession and a "dovish" reversal of the Fed. Divergences in economic growth and central bank monetary policy paint an optimistic future for the GBPUSD.

Technically, on the daily chart of the pair, due to the implementation of the reversal patterns Three Indians and False breakout, conditions have been created for the recovery of the upward trend. While GBPUSD is holding above fair value at 1.202, the recommendation is to buy the pound in the direction of $1.235 and $1.26.