GBP/USD Forecast: Pound Sterling weakens as dovish BoE bets return after PMI data
- GBP/USD dropped to a fresh weekly low below 1.2700 on Wednesday.
- UK data showed that economic activity in the private sector contracted in August.
- Next technical support for the pair is located at 1.2650.
GBP/USD turned south and dropped to a new weekly low below 1.2700 after spending the Asian session in a tight channel at around 1.2750. Unless the pair manages to reclaim 1.2700, additional losses could be seen in the near term.
Pound Sterling came under heavy selling pressure after the data from the UK highlighted the loss of momentum in the economy. S&P Global/CIPS Manufacturing PMI dropped to 42.5 (flash estimate) in August and the Services PMI slumped to 48.7 from 51.5 in July.
Pound Sterling price today
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.28% | 0.44% | 0.02% | -0.10% | -0.30% | -0.10% | 0.03% | |
| EUR | -0.28% | 0.16% | -0.26% | -0.38% | -0.59% | -0.38% | -0.26% | |
| GBP | -0.44% | -0.16% | -0.43% | -0.55% | -0.75% | -0.55% | -0.42% | |
| CAD | -0.01% | 0.26% | 0.43% | -0.11% | -0.33% | -0.12% | 0.01% | |
| AUD | 0.07% | 0.38% | 0.54% | 0.12% | -0.20% | -0.01% | 0.13% | |
| JPY | 0.31% | 0.57% | 0.74% | 0.33% | 0.21% | 0.17% | 0.32% | |
| NZD | 0.11% | 0.39% | 0.54% | 0.13% | 0.01% | -0.19% | 0.14% | |
| CHF | -0.03% | 0.26% | 0.42% | -0.01% | -0.13% | -0.34% | -0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
According to Reuters, interest rate swaps suggest that markets are pricing in a less than 50% of the Bank of England's terminal rate reaching 6% after the disappointing PMI readings.
Assessing the details of the PMI surveys, “the early PMI survey for August suggests that inflation should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
"While a further hike in interest rates in September looks to be on the cards, the August PMI data will add to speculation that rates could soon peak," Williamson added.
In the second half of the day, S&P Global PMI data from the US will be looked upon for fresh impetus. Although upbeat PMI figures could provide a boost to the USD, a bullish opening in Wall Street could make it difficult for the currency to preserve its strength. At the time of press, US stock index futures were up between 0.4% and 0.75%.
GBP/USD Technical Analysis
GBP/USD returned within the descending channel and the Relative Strength Index (RSI) indicator on the four-hour chart dropped to 40. 1.2650 (mid-point of the descending channel) aligns as first support before 1.2615 (August 14 low) and 1.2600 (psychological level, static level).
In case GBP/USD recovers back above 1.2700 (upper limit of the descending channel) and starts using that level as support, buyers could show interest. In that scenario, the pair could face stiff resistance in the 1.2740-1.2750 area, where the 20-, 20- and 100-period Simple Moving Averages are located.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
