2023 can safely be called a year of pleasant surprises. In January, thanks to warm weather and falling gas prices, the eurozone economy cheered, allowing us to say that there will be no recession. At the beginning of February, investors were reeling from strong macrostatistics in the USA, which made markets put aside the idea of a soft or hard landing and start speculating about a new takeoff. Finally, in the middle of the last month of winter, it was Britain's turn. A faster-than-expected slowdown in inflation, a still strong labor market and a 0.5% MoM spike in retail sales increase the likelihood of a minor recession. Will GBPUSD be able to launch a counterattack?

The United Kingdom is following the path of the United States. Despite the increase in unemployment from 3.5% to 3.7%, the figure remains at its lowest point in recent decades. Employment growth accelerated in October–December, and the slowdown in inflation and average wages indicates that the Bank of England is doing its job effectively. Thanks to a strong labor market, consumers feel confident and spend money, which is confirmed by the positive dynamics of retail sales.

At the same time, the UK economy looks worse than the rest of the G7 countries because Brexit and the energy crisis, with its crazy household bills for electricity, are added to the general problems in the form of high inflation, the cost of living crisis, and tightening monetary policy. Not surprisingly, Britain is the only major economy that has yet to recover to pre-pandemic levels.

Dynamics of economic recovery of the G7 countries

However, Britain's problems have been known for a long time, the recession factor is already embedded in sterling quotes, so any positive becomes a reason for it to rebound upwards. In this regard, strong statistics on employment and retail sales, and a faster decline in consumer price growth, allowed the GBPUSD bulls to find the bottom.

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They might develop a counterattack if the data on British business activity proves to be better than expected and representatives of the Bank of England choose a hawkish rhetoric in their speeches. On the other hand, politics may add to the pound's problems. London is on the verge of signing an agreement on the Northern Ireland protocol as part of Brexit, but its terms may not please the ardent supporters of a British and EU divorce in Parliament, which will negatively affect the position of Prime Minister Rishi Sunak. His shattered credibility is one of the reasons why GBPUSD fell to 1.1, according to Credit Agricole's forecast.

Bank of America is not such a bloodthirsty bear. It recommends selling the pair on the rise, but believes that sterling's cyclical bottom has been passed, and 2023 will be a year of expectation.

GBP/USD

Technically, the GBPUSD rebound from the 1.196 pivot level and the formation of a pin bar with a long lower shadow signal a bearish counterattack. It makes sense to start short-term buying on a break of resistance at 1.205

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