The Cable started the week strongly amid a better mood across the markets. The GBP/USD pair gapped higher and stretched to its highest level since Aug. 30 despite weaker-than-anticipated U.K. data.
At the time of writing, the GBP/USD pair is trading at the 1.1680 area, posting a 0.8% daily gain, having set a high of 1.1704 earlier on the day.
UK GDP grew slower than expected by 0.2% in July, below the market consensus of 0.5% but bounced after a contraction of 0.6% in June.
At the same time, Industrial Production decreased by 0.3%, while the market expected an expansion of 0.4%, and Manufacturing Production expanded at a slower-than-expected rate of 0.1%, below the consensus of 0.6%.
Other data showed that the Index of Services decreased by 0.2%, while the U.K. Trade Balance deficit was confirmed at £7.79 billion as expected.
Still, the pound managed to post daily gains for the second session in a row as the greenback staged a downward correction across the board.
The U.S. dollar, measured by the DXY index, fell to its lowest in two weeks at 107.81 before trimming losses.
Investors focus on U.S. CPI figures, which will be released on Tuesday, as they could play an essential role in the FOMC interest rate decision next week.
The WIRP tool points to 90% odds of a 75 bps rate hike by the Fed, while the BoE’s next meeting has been postponed to Sept. 22 in the light of the Queen's death.
Investors are betting on a 60% probability of a 75 bps increase in that meeting.
The short-term technical outlook for the GBP/USD pair remains bearish, although it has improved according to the daily chart.
The RSI gained a significant positive slope, while the MACD crossed above its signal line and printed a green bar for the first time since mid-August.
On the upside, the next critical resistance stands at the 20-day SMA, currently at 1.1710. A break above could pave the way for an advance towards the 1.1750 zone and then to the 1.1800 psychological mark.
On the downside, the immediate support could be found at the 1.1600 level. A loss of this area would expose the 1.1500 zone, and the cycle low hit on Sept. 7 at 1.1404.