GBP/USD, DAX Forecast: Two trades to watch

GBP/USD rises as UK GDP recovered in Q4

• UK Q4 GDP rose 0.1%, up from 0% in Q3
• US PPI and jobless claims
• GBP/USD tests 1.25 resistance

The pound is pushing higher after data showed that the UK economy unexpectedly grew by 0.1% in the final quarter of the year.

GDP for Q3 was ahead of the 0% growth seen in Q3 and ahead of the 0.1% contraction that economists forecast. However, this does suggest that the economy is still struggling to gain momentum. The Q4 performance was lifted by solid growth of 0.4% in December, driven by the dominant service sector.

The data was stronger than expected 2024 expanded by 0.9% up from 0.4% in the previous year. However, the outlook for 2025 is not so encouraging after the Bank of England slashed its growth forecast to 0.75% from 1.5% last week.

Low business and consumer confidence suggest that the coming year could see stagnant growth amid weak investment and cautious consumer spending.

Meanwhile, the pound is also capitalising on the weaker U.S. dollar. Yesterday, U.S. dollars saw a volatile session after hotter-than-expected CPI data lifted the USD before news of progress towards peace talks between Russia and Ukraine pulled the safe-haven dollar lower.

Attention is now turning to US PPI and jobless claims data. PPI inflation is expected to ease to 3.2% year on year from 3.3% but rise, 0.3% month on month, up from 0.2% in December. Hotter than expected PPI could lead to higher consumer price inflation expectations, causing the market to further rain Fed rate cut, but.

GBP/USD forecast – technical analysis

GBP/USD recovery from 1.21 has stalled and remains capped by the 50 SMA and 1.25. Buyers, supported by the RSI above 50 need to rise above 1.25 to extend gains towards 1.26.

If the pair fails to rise above the 50 SMA and 1.25 levels, it could retest 1.2350, the weekly low, and 1.23, the April 2024 low.

DAX rises to a record high on Ukraine optimism

• Trump’s productive call with Putin raises hopes of peace
• German inflation cooled to 2.3%, boosting ECB rate cut hopes
• DAX rises to an ATH but is overbought

The DAX opened higher and rose to a fresh all-time high on optimism surrounding a potential resolution to the Russia and Ukraine war

Yesterday, Trump announced a productive call with Russian President Putin, during which the two agreed to work closely to achieve a ceasefire between Russia and Ukraine.

Peace talks will start immediately. The end of the war in Ukraine brought an end to uncertainty and risk that had lingered for three years. However, uncertainty regarding potential trade tariffs could limit the upside

Meanwhile, German inflation eased, adding to ECB rate cut bets. German CPI cooled to 2.3% year on year, down from 2.4% previously. The data supports the ECB's view that the disinflation process is continuing. The prospects of more ECB rate cuts have helped power German stocks to record highs.

Eurozone industrial production fell -1.1% Month over Month, worse than the forecast -0.6% decline. The data highlights the sector's struggles.

DAX forecast - technical analysis

The DAX has risen to a fresh all time up at 22,470 and has eased modestly lower to 22,350 at the time of writing. The RSI is well into overbought territory so a period of consolidation or a pull back could be on the cards.

Support could be seen at 21,500 round number. A 21k creates a lower low.

Buyers will look to rise above 22,470 to rise to fresh record highs.