Forex: GBP/USD bouncing after plunge on UK industry

Worries about the UK economy after industrial and manufacturing production data sent the GBP/USD down to 1.4832 low, but support around 1.4840 pulled the market for a respectable bounce, currently at 1.4870. Given that the pair dropped from 1.4915, it's not even 50% retracement yet.

UK industrial production fell -1.2% (consensus of +0.1%) and manufacturing production dropped -1.5% (consensus of 0.0%) in January. Annualized data contracted further from -2.1% to -2.9% (consensus of -1.1%) and from -1.6% to -3.0% (consensus of -1.1%), respectively.

TD Securities analysts explain the fairly broad based decline in manufacturing that wiped out the 1.5% gain in December: “A shutdown in a North Sea oil platform caused the Oil and Gas sector to fall 4.3% in the month, but in fact, the boost for the utilities sectors from the cold weather more than compensated for this hit within the headline IP data and helped the sectors outside of manufacturing, including the platform shutdown, moderate the weakness in this month’s production data”, wrote analyst Tim Davis.

“Still in a corrective mode within the minor rebound above 1.4866 and my outlook remains bearish, for a slide towards 1.4780”, wrote Deltastock.com analyst Stoyan Mihaylov, pointing to initial major resistance at 1.4980.