Pound Sterling experiences a sell-off after mixed UK factory data.

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• Pound Sterling experiences a sell-off after mixed UK factory data.
• The UK economy is expected to report a technical recession despite 0.3% growth in November GDP.
• Investors await the US PPI, UK labor market and inflation data for further action.

The Pound Sterling (GBP) faces a correction after the United Kingdom Office for National Statistics (ONS) reported mixed factory data for November. Monthly growth in the manufacturing sector was slightly higher while annual data failed to match expectations. Overall economic data was slightly better than expectations but seems incapable of taming fears of a technical recession happening in the UK economy.

Going forward, the Pound Sterling will be guided by the labor market and inflation data, which are due to be released next week. Cooling labor market conditions and a further decline in price pressures will deepen hopes of a dovish interest rate outlook from the Bank of England (BoE) in its first monetary policy announcement of 2024 on February 01.

Meanwhile, near-term demand for the Pound Sterling is upbeat due to improved market sentiment. The GBP/USD pair remains in the bullish trajectory as chances of an interest rate cut from the Federal Reserve (Fed) remain firm despite a sticky United States Consumer Price Index (CPI) report for December.

Pound Sterling faces pressure from two-week high around 1.2790 after the release of UK factory data. The broader appeal for the GBP/USD pair is upbeat as 20 and 50-day Exponential Moving Averages (EMAs) are sloping higher. The Cable aims to sustain above the 61.8% Fibonacci retracement at 1.2710 (of the move from 13 July 2023 high at 1.3142 to 4 October 2023 low at 1.2037).

The 14-period Relative Strength Index (RSI) attempts to break above 60.00. A bullish momentum would trigger if the RSI (14) manages to do so.

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