The pound sterling exchange rate weakened further in Thursday's (22/December) trading. GBP/USD weakened further to the 1.2050s range based on a data release.
Meanwhile, the EUR/GBP pair climbed By 0.5 percent to the 0.8820s range. It was being hit hard by the central bank's announcement last week.
After that, the publication of the UK's Gross Domestic Product (GDP) data earlier this afternoon reinforced a bearish bias in the currency's fundamentals. This becomes another consideration owned by market participants.
The UK economy contracted by -0.3 percent in the third quarter of 2022. It means that the data was worse than the previous estimate of -0.2 percent for Quarter-over-Quarter type.
Annual GDP Growth Rate Dragged Down
The annual GDP growth rate also dragged down from 4.4 percent to just 1.9 percent. Previously it was expected to slow down to only 2.4%.
The figures show that the UK's economy is relatively lagging behind compared to a number of other developed countries. The National data confirms that the United Kingdom is the only G7 country whose third-quarter GDP data is still below pre-COVID levels.
It was said by Samuel Tombs, a chief UK economist at Pantheon Macroeconomics. Great Britain's performance is likely to continue to be poor based on the recent situation.
People expect the UK to experience the worst recession compared to other developed countries in 2023. It was due to poor pressure from fiscal and monetary policy.
UK Fiscal Condition is Still Not Good
The Public lending data released on Wednesday revealed another threat lurking in the pound sterling. Those are actually the current account deficit and fiscal deficit.
The reason is that British public loans last month showed the highest increase compared to the history of the previous November months. The loan data is just a reminder of how difficult the UK's position is fiscally.
That was said by Sean Callow, a senior currency strategist at Westpac. In a world where risk sentiment is still very fragile, currencies whose countries have dual deficits are at greater risk than any other country.
Elsewhere, WTI crude oil prices rose above $79 a barrel as oil demand optimism increased during the holiday season. Meanwhile, the latest data on US crude inventories showed a decline of 5.89 million barrels.
Oil Demand from China is Recovered
The numbers above are more than the market forecast for a decline of 1.66 million barrels alone. Oil prices were also supported by the recovering outlook for oil demand from China.
It is especially after the Zero-COVID policy was relaxed. The Xi Jinping-led country is also determined to disburse more stimulus to boost economic activity.
Technically, Oil prices managed to close in the green for three consecutive days. As it continues to hold above the Supertrend indicator, WTI oil is still bullish to rise further to around the level of 79.50.
This scenario applies if the price does not weaken below the area of 78.16-77.50. Elsewhere, EUR/USD still looks to be trading erratically. Observed in this week, the movement of this pair still does not reflect a clear direction.
EUR/USD Moved in a Limited Range
The large number of investors who started to exit the market to prepare for the long Christmas and New Year holidays made the trading conditions of several major currencies choppy.
However, there are two trading scenarios that can be taken for the current market conditions. EUR/USD during the week moved within a limited range.
Erratic conditions and reduced volatility made the pair only move between the demand zone 1.0550 – 1.0500 and the supply zone 1.0675 – 1.0740. Seeing the inherent bullish potential, the main scenario that can be anticipated is to buy in the demand zone.
An alternative sell scenario can be taken only if EUR/USD manages to form a bearish movement. A bearish phase is expected to appear when the price manages to break through the 1.0500 level.
