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UK manufacturing production preview: What to expect in GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 12, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Mumbai) - The GBP/USD pair remains under pressure and languishes near lows at 1.4525, as the ongoing weakness in oil prices continue to dampen the sentiment towards risk currencies such as the GBP. From a wider perspective, dwindling 2016 BOE rate hike expectations combined with looming concerns over a possible Brexit also keeps the cable heavily depressed near five-year lows reached last week just below 1.45 handle.

    Attention now shifts towards the UK manufacturing and industrial production data due to be published at 9.30GMT for further insights into the health of the UK economy.

    Manufacturing output to rebound in Nov


    The manufacturing output, the main component of the total industrial output, is expected to have rebounded slightly in November, by 0.1% m/m, after posting a decline of 0.4% in Oct before. While the total industrial production, which includes extraction of oil and gas from the North Sea, is likely to remain flat, after increasing 0.1% previously.

    The UK factories continue to face headwinds on the back of weaker exports as negative impact of stronger exchange rates and global growth concerns continue to weigh.

    Analyst at Danske Bank noted, “In the UK industrial and manufacturing production and construction output in November are due. The figures should give us more insight into how the UK performed growth-wise in Q4. We think GDP growth picked up in Q4 following the slowdown in Q3.”

    GBP/USD Technical Levels

    The cable is currently hovering near 1.4520 region, and should the data miss expectations, the prices could drop further towards 1.4490/86 (Jan 11 Low/ daily S1), below which it could extend losses to 1.4430 (daily S2, 2010 levels). Selling pressure would intensify below the last, dragging the pair towards 1.4345 (June 2010 Low). On the flip side, if the data surprises on the upside, the prices could swing back higher to 1.46 barrier, with the immediate hurdle placed at 1.4623/68 (10-DMA/ 1h 200-SMA), beyond which 1.4700/20 (round number/ daily R3) could be tested.
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