Pound Maintains Bullish Stance Amid Weak UK Factory Data

The Pound Sterling (GBP) continues to hold its ground in spite of weak UK factory data for August. The GBP/USD pair remains bullish despite the Office for National Statistics (ONS) reporting that UK factory data contracted for the second consecutive month. This contraction was driven by UK firms operating at reduced capacity to enhance efficiency, which involved cutting inventory backlogs and labor forces due to declining demand.

This slowdown in demand and overall output poses concerns for Bank of England (BoE) policymakers as they prepare for the upcoming interest rate decision in November. While some, like BoE's Katherine Mann, lean towards tightening policy to curb inflation and bring it down to 2%, Swati Dhingra from the central bank supports a rate cut if the growth rate falls beyond expectations.

Concerns about potential inflation rebounds persist due to geopolitical tensions in the Middle East, which could keep the oil market tight until 2024. Additionally, the UK faces energy shortages due to supply chain disruptions, which could exacerbate headline inflation and challenge the government's commitment to halve it to 5.2%.

GBP/USD continued its advance toward the 1.2300 target and now the price facing some resistance at that level. A comeback will take the price toward the 1.2200 support level and a breakout up will take the price to the 1.2450 level.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.2600	1.2450	1.2300	1.2200	1.2100	1.2000