The British pound is likely to remain depressed as investors digest GDP figures released by the Office for National Statistics (ONS) Thursday, which indicates Britain is the world’s slowest growing major economy.
Lukman Otunuga, a research analyst at ForexTime (FXTM), a Lagos-based forex broker, said the released data could invite a decline to 1.4000 against the dollar ahead of the Easter holiday, adding that a strengthening dollar could fuel further downside on the GBP/USD.
“Taking a look at the technical picture, GBP/USD remains under pressure on the daily charts. Sustained weakness below the 1.4100 could invite a decline towards 1.4000,” he noted.
The ONS confirmed that gross domestic product reached 0.4 percent in the final quarter of 2017, slowing from growth of 0.5 percent in Q3. Although the ONS revised estimates for full-year growth in 2017 to 1.8 percent from 1.7 percent, it remains the lowest growth rate since 2012.
Conversely, the dollar held tightly onto its gains against a basket of currencies on Thursday, after fourth-quarter US GDP figures were revised up to 2.9 percent from 2.5 percent in the previous session.
The upwards revision to the fourth quarter growth boosted sentiment towards the US economy and stimulated expectations over the Federal Reserve adopting a slightly more aggressive approach on rate hikes this year.
Speculations around higher rates have injected dollar bulls with a renewed sense of confidence, elevating the dollar against its major counterparts.
“The dollar Index is slowly building momentum on the daily charts. The candlesticks are in the process of crossing above the 20 Simple Moving Average, while the MACD is showing early signs of trading to the upside.
“Prices have breached above the 90.00 resistance level which could encourage an incline higher towards 90.45. Alternatively, a failure for prices to keep above 90.00 may result in a decline lower towards 89.50,” Otunuga noted
South Africa’s rand extended its losses against the dollar during early trading on Thursday, following Wednesday’s interest rate cut by the South African Reserve Bank (SARB).
There has been a recovery in the dollar strengthened against many of its different counterparts over the past 24 hours, so it is possible that the dollar’s recovery could be a culprit behind some of the current rand weakness.
According to Otunuga, comments from Lesetja Kganyago, SARB governor that the rand is now ‘somewhat’ overvalued, is likely to provide a scenario where it may be difficult for the rand to advance any further than the 4.87 percent it has already made year-to-date.
“An appreciating dollar could push the USDZAR towards 11.830 in the near term.”
On equity markets, Otunuga sees global markets struggling for direction as investors stroll to the sidelines ahead of the Easter weekend.
Asian stock markets were mostly mixed in thin trade, as a tech-fuelled selloff on Wall Street overnight weighed on investor sentiment. Although European stocks opened slightly higher, gains could be limited as the holiday mood kicks in.
