Quick overview
Thursday saw the British pound hold firm against the US dollar, trading near 1.3569 after a big bounce from last week’s 1.3367 low. This despite renewed concerns over UK public finances and a dovish shift in expectations for the Bank of England (BoE).
The UK government’s borrowing figures released Tuesday showed a worrying rise – the second highest June reading since 1993 – driven by high interest costs due to inflation. And talk of tax hikes in the Autumn Statement is back on the table.
But the Pound shrugged it off. Much of the bad news is priced in and markets are waiting for a 25 basis point BoE rate cut in August. Big players like Goldman Sachs and Bank of America are now expecting easing but sentiment is surprisingly steady as the UK economy shows signs of life.
GBP Data Mixed
This morning’s flash PMI figures from the UK showed a slight divergence in sector performance. Services PMI was steady at 52.8, Manufacturing PMI dipped to 47.9, still in contraction. Higher social security costs may be weighing on employment but the steady services reading supported confidence.
Now attention is turning to Friday’s BoE commentary and growth figures. Will the BoE be more dovish or pause, especially with fiscal strain and soft demand?
GBP/USD Hits Technical Barrier at 1.3588
From a technical view, GBP/USD has risen 200 pips from the July lows and is now testing the descending trendline resistance from the June high. The pair is trading just below 1.3588, a level that is both horizontal and dynamic resistance.
GBP/USD Price Chart – Source: Tradingview
50-SMA on the 4H chart at 1.3459 is strong support
RSI is 68.90, overbought
Price has made higher lows, bullish
If bulls can break above 1.3588-1.3600, the next level of resistance is 1.3670 then 1.3722. But if price stalls and prints bearish candles near the trendline, a pullback to 1.3523 or 1.3459 could happen before the next leg up.
Summary
GBP/USD is at the wire, technical and dollar driven. US PMIs and new home sales out today, be ready for action.
Arslan Butt
Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.
His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.
His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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