• Home
  • Pro
  • Partners
  • Help and support
  • English
  • 中文版
Pepperstone logo
Pepperstone logo
  • Ways to trade
    • Trading accounts

      Choose from two account types depending on your strategy

    • Premium clients

      Exclusive rewards and bespoke benefits for high-vol traders

    • Pricing

      Discover our tight spreads, plus all other possble fees

    • Pro
    • Active trader program
    • Refer a friend
    • Trading hours
    • 24-hour trading
    • Maintenance schedule
    • Risk management
    • Funding and withdrawals
  • Markets
    • Margin FX

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Commodity CFDs

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Cryptocurrency CFDs

      Speculate on Bitcoin, Ether and more, with a trusted broker

    • Share CFDs
    • Index CFDs
    • ETF CFDs
    • Currency Index CFDs
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
  • Trading platforms
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader 4
    • cTrader
    • Trading tools
  • Market analysis
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

  • About us
    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online
    • Trading accounts

      Choose from two account types depending on your strategy

    • Premium clients

      Exclusive rewards and bespoke benefits for high-vol traders

    • Pricing

      Discover our tight spreads, plus all other possble fees

    • Pro
    • Active trader program
    • Refer a friend
    • Trading hours
    • 24-hour trading
    • Maintenance schedule
    • Risk management
    • Funding and withdrawals
    • Margin FX

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Commodity CFDs

      Trade on metals, energies & softs, with oil spreads from 2 cents

    • Cryptocurrency CFDs

      Speculate on Bitcoin, Ether and more, with a trusted broker

    • Share CFDs
    • Index CFDs
    • ETF CFDs
    • Currency Index CFDs
    • Dividends for index CFDs
    • Dividends for share CFDs
    • CFD forwards
    • TradingView

      Trade through the world-famous supercharts with great pricing

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
    • MetaTrader 4
    • cTrader
    • Trading tools
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
    • Company awards
    • Protecting clients online

Economic Optimism Spreads To The UK

Michael Brown
Michael Brown
Senior Research Strategist
22 Feb 2023
Share
After weeks of increasing economic optimism in the US, every man and his dog appears to have jumped on the ‘no landing’ bandwagon – expecting that unemployment won’t rise too much, growth won’t decline too much, though this of course runs the longer-term risk of it becoming substantially more difficult to return inflation to central banks’ 2% target. In any case, while an escalating number of aeroplane analogies circulate, markets are increasingly starting to price a more optimistic macro backdrop in Europe.

Tuesday’s surprisingly stronger than expected UK PMI figures have clearly led more than a handful of market participants to rip up the recessionary playbooks that they had outlined for the year ahead, after data showed an unexpected expansion in the services sector, along with substantially better than expected conditions in the manufacturing industry.

Preview

The market reaction to the figures was significant, and sudden; again being let by fixed income, as has been the broader theme across the globe of late. Stronger than expected figures led traders to re-assess their expectation that the BoE would bring the hiking cycle to an end next month, with money markets pricing in almost an entire extra 25bps hike in the spring between the data dropping, and this article going to press.

This hawkish repricing also saw gilt yields tear higher across the curve, with 2-year yields piercing the psychologically important 4% mark, while the 10-year tenor sold off by the most since 6th January. Unsurprisingly, this sparked notable demand for the GBP, which had its best day of the month against the greenback, though moves were more pronounced in the crosses – EUR/GBP touched near 1-month lows, while GBP/AUD rose to 1-month highs.

These moves leave one pondering whether the ‘doom and gloom’ narrative that has been pressuring the quid of late might have run its course. From a technical standpoint, cable has managed to hold above the 1.20 handle, with the bulls having also mounted a valiant defence of the 200-day moving average around 1.1940. Perhaps the ‘double-top’ formation that was on everyone’s radar won’t play out after all.

Preview

It is, again, in the crosses however where better opportunities may present themselves.

Take EUR/GBP, for instance. The EUR side of the equation sees a rate curve that fully prices what the ECB have pledged to deliver, leaving scope for dovish disappointment, along with an economy that while performing well, now faces a higher bar when it comes to upside data surprises. Meanwhile, in the UK, data seems to be improving (not only in terms of activity, but also borrowing, with an unexpected budget surplus seen last month), energy prices are rolling over nicely, and the labour market remains impressively, and surprisingly, tight.

In this environment, a lower EUR/GBP seems like a logical expectation. The technical picture supports such a view, with price having closed below the bottom of the uptrend channel that has been in place since the turn of the year, and said resistance holding upon a re-test. The bears are likely to target the 100-day moving average around 0.8750 initially, though a break of this level could see spot trade back towards the mid-0.86s as seen towards the tail end of 2022.

Preview

Long GBP/JPY is another cross that should be on the radar. The post-PMI rally rather stalled at a confluence of the 100- and 200-day moving averages just north of 163, though the bulls will be poised to pounce on a break above this level. A closing break here, and even better a move above the 50% retracement of the Q4 22 decline, leaves the door open to a return towards 165.

Preview

Related articles

Volatility to rise? Watch interest rate markets

Volatility to rise? Watch interest rate markets

Volatility
A traders’ week ahead playbook – finding trades in a lower volatility market

A traders’ week ahead playbook – finding trades in a lower volatility market

USD
Volatility

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Premium Clients
  • Active Trader program
  • Refer a friend
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets & Symbols

  • Forex
  • Shares
  • ETFs
  • Indices
  • Commodities
  • Currency indices
  • Cryptocurrencies
  • CFD Forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Meet the analysts

Learn to Trade

  • Trading Guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
1300 033 375
Level 16, Tower One, 727 Collins Street
Melbourne, VIC Australia 3008
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Whistleblower Policy
  • Sitemap

© 2025 Pepperstone Group Limited

Risk Warning: Trading CFDs and margin FX is risky. It isn't suitable for everyone and if you are a professional client, you could lose substantially more than your initial investment. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your personal objectives, financial circumstances, or needs. You should consider whether you’re part of our target market by reviewing our TMD, and read our PDS and other legal documents to ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice if necessary.

Pepperstone Group Limited is located at Level 16, Tower One, 727 Collins Street, Melbourne, VIC 3008, Australia and is licensed and regulated by the Australian Securities and Investments Commission.

The information on this site and the products and services offered are not intended for distribution to any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

© 2024 Pepperstone Group Limited | ACN 147 055 703 | AFSL No.414530