- GBP/USD hit one-week highs after British PMI data disappointed expectations.
- The dollar extended its gains after the US PMI numbers came in well above forecasts.
- The next boost for the Dollar will be tomorrow with the speech of the Fed Chairman, Powell, and on Thursday with the GDP.
The GBP/USD pair lost points on Tuesday, falling from a one-week high just below the 1.2300 zone, after the UK Purchasing Managers’ Index (PMI) figures turned red, while the US PMI data far exceeded forecasts, beating market forecasts and marking an acceleration of economic activity in the US economy.
As the US economy continues to gain ground while the rest of the global economy stagnates or begins to show cracks, market sentiment is prone to downward shocks as continued improvement in US economic indicators .US decreases the chances that the Federal Reserve (Fed) will accelerate the pace of rate cuts in the future.
Markets currently expect Fed rate cuts to begin sometime in the second half of 2024, but the lack of weakness in the U.S. economy bodes poorly for interest rate reduction hopes. Investors flocked to the safe-haven US Dollar in reaction to the US PMI numbers coming out in the green across the board.
The UK preliminary services PMI fell slightly to 49.2 in October, compared to the expected 49.5.
The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rebounded slightly to 45.2 in October, just above the forecast of 45.0 and beating the final reading of 44.3 in September.
At the same time, the preliminary index of business activity in the UK services sector fell to its lowest level in nine months, standing at 49.2 in October, down from 49.3 in September and below the 49.5 expected.
In early October, U.S. private sector economic activity showed steady but moderate expansion. The S&P Global Composite PMI advanced to 51 from 50.2 in September.
In October, the Manufacturing PMI rose from 49.8 to 50, while the Services PMI rose from 50.1 to 50.9. Both components of the US PMI leading indicator exceeded the expectations of industry analysts.
Following another round of bullish data for the Dollar, GBP/USD will be watching Fed Chair Jerome Powell’s speech on Wednesday, as he will deliver the keynote speech at the Moynihan Conference on Social Science and Public Policy in Washington, DC. .
Preliminary US Gross Domestic Product (GDP) figures will also be released on Thursday, along with jobless claims.
US preliminary GDP for the third quarter of 2023 is expected to increase noticeably from 2.1% to 4.3%, while initial jobless claims for the week of October 20 are expected to show a slight increase of new applicants for unemployment benefits, from 198,000 to 208,000, a net increase of 10,000.
GBP/USD Technical Outlook
With Tuesday’s pullback, GBP/USD faces rejection of a downtrend line from July highs near 1.3141, after the pair failed to reclaim the 1.2300 area, and the immediate downtrend sees a bottom price since the last major swing low at 1.2037 in early October.
Bullish momentum will face stiff resistance from the downtrend line as well as the latest swing high at 1.2337, and the Pound-Dollar pair is set for near-term consolidation if market risk appetite turns rally, or an extension of bearish declines if US data continues to dampen investors’ hopes of rate-cut-inspiring weakness.
GBP/USD Daily Chart
GBP/USD Technical Levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
