GBP/USD got a minor pop higher on UK February GDP figures but they aren’t as great as the headline suggests
Cable moved up from 1.3060 levels to a high of 1.3083 after UK February GDP beat estimates but once again this owed much to a boost in manufacturing activity, which is basically pumped higher by pre-Brexit stockpiling.
As mentioned several times before, this is mostly a temporary boost to sentiment for now and eventually this is going to come back and bite the economy in the backside; so that’s something that traders should be aware of in the coming months when inventories load up and factory activity/demand starts to plummet.
That said, regardless of the data, the focus for the pound this week is on the Brexit extension and all eyes will be on Brussels now as European leaders look set to offer a long extension with certain conditions attached to it.
For cable, price is now hovering between the key hourly moving averages after the earlier ‘pop’ stalled at the 200-hour MA (blue line) @ 1.3082.
The UK government may not be in favour of a long extension but at this point, May has to accept that regardless given the situation. As it stands, it looks like markets have factored in much of the extension headlines but I still wouldn’t be surprised if the pound catches a light bid once it is made official.
The highs of around 1.3125 will be the first area to look at on such news breaking out but the fact that we’re no closer to resolving the Brexit impasse means that any break higher will likely be tempered with once the dust settles.