• The Pound continues appreciating and reaches a 2, 1/2-month high at 1.1840.
  • UK GDP contracted less than expected in Q3.
  • The US Dollar remains under pressure on Fed easing hopes.

The pound has rallied for the second consecutive day against a battered US Dollar, to hit fresh two-week highs at 1.1840 so far. On the weekly chart, the pair is on track to a 4.8% rally in its best weekly performance in more than two years.

UK GDP contracts less than expected in Q3

Preliminary UK Gross Domestic Product has shown a 0.2% contraction in the third quarter, significantly above the -0.5% market consensus following a 0.2% advance in the previous quarter. Year on year, the UK economy slowed down to 2.4% from 4.4%, still better than the 2.1% reading anticipated by market analysts.

Although these figures confirm the Bank of England’s forecasts that the country is entering a lengthy recession, the market seems to have welcomed the data, which has allowed the pair to extend its sharp two-day rally.

On the other end, the US Dollar has extended its sell-off, triggered by the softer US inflation figures seen on Thursday, which has acted as a tailwind for the pair. US CPI slowed down to a 7.7% yearly rate in October, according to data from the US Bureau for Labor Statistics, well below market expectations of 8% and down from the 8.2% reading seen in September.

These data suggest that inflationary pressures may be easing, which has boosted expectations of a dovish shift by the US Federal Reserve over the coming months. This has crushed demand for the US and boosted world equity markets.

In a very thin US calendar, the Preliminary Michigan Consumer Sentiment Index anticipated a sharper-than-expected deterioration in November. Higher prices and concerns about the increasing interest rates are weighing on consumers’ confidence.

Technical levels to watch

This article was originally published by Fxstreet.com.Read the original article here.

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