CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

GBP strengthens as UK economy rises above pre-pandemic levels

Article By: ,  Senior Market Analyst
January 14, 2022 10:30 AM

The UK economy contracted over 9% in 2020 owing to the pandemic, which was one of the largest economic contractions in the developed world. After solid growth in 2021, the UK economy is finally larger than it was at the start of the pandemic.

The economy grew 0.9% MoM in November, ahead of the 0.4% forecast. On a rolling 3-month basis, GDP grew 1.1% the 3 months to November ahead of the 0.8% forecast.

The surge in economic growth in November has been attributed to a combination of factors, including a faster pace of growth in construction as global supply chains eased and raw materials were easier to get hold of. Secondly. The fact that retailers had a strong November suggests that shoppers were out doing Christmas shopping early.

Whilst November’s data is encouraging, it is worth pointing out that surging Omicron infections in December could still knock growth in the final month of Q4. Particularly given the high rates of staff absences. That said, the impact from Omicron is widely expected to be short lived, with cases already falling consistently.

As such Omicron shouldn’t prevent the BoE from pressing ahead to hike interest rates in February. Currently the BoE forecasts that the UK economy will return to its pre-COVID size in Q1 2022.

There are still challenged ahead for the UK economy, such as 3-decade high inflation, rising energy prices and ongoing supply chain issues.

Client positioning

Our clients are net short EUR/GBP. 58% of those trading EURGBP across the Stone-X retail brands expect GBP to strengthen against the euro.

Where next for EUR/GBP?

EUR/GBP trades lower following the data. The pair trades below its 50 & 100 sma on the 4 hour chart, the 50 crossed below the 100 in a bearish signal.

After hitting a 23 month low of 0.8323 the pair has been in consolidation mode, capped on the upside by 0.8365 the weekly high and 0.8323 the yearly low.

Traders might look for a breakout trade from here. Buyers are looking for a move over 0.8365 to test 0.8380 the 100 sma and 0.8420 the 2022 high.

Sellers could look for a move bellow 0.8323 to test 0.83 round number and 0.8280 a key level from 2020.

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

 

 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024