GBP/USD – Pound under pressure as manufacturing orders sink

After a flat start to the week, GBP/USD has edged lower on Tuesday. Currently, the pair is trading at 1.2694, down 0.23% on the day. On the release front, Mark Carney’s testimony on inflation before a parliamentary committee has been cancelled. British CBI Industrial Order Expectations slipped to -10, weaker than the estimate of -6. This marked the lowest score since November, as manufacturing orders continue to decline. In the U.S., existing home sales is projected to climb sharply to 5.35 million.

Brexit has been on the backburner in recent weeks, but the upcoming election for the European Parliament could boost anti-Brexit parties. Key issues in the election, which covers all 28 member EU states, include the economic slowdown, the migrant crisis and the rise in Euroskpeticism. Euro-skeptics increased their representation in parliament from 12% to 25% in the last election, and with the dramatic increase in strength of populist parties, this trend could well continue. The U.K. will participate in the vote, although the country is on its way out of the EU. The Conservatives are expected to have a poor showing, while anti-Brexit parties could make major gains. This could weigh on the British pound which plunged 2.1% last week.

U.S.- China trade tensions continues to simmer, which has boosted the safe-haven U.S. dollar. On Friday, the Trump administration had announced it was imposing trade sanctions on the Chinese telecom giant, a move which sent stock markets reeling on Monday. However, the U.S. Commerce Department has taken a step back, saying that it will provide 3-month exemptions to U.S. companies that sell to Huawei. The tussle over Huawei has exacerbated the trade war between the two economic giants, and risk appetite will remain soft until the sides resume negotiations.

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GBP/USD Fundamentals

Monday (May 20)

• 9:30 British CB Leading Index. Actual -0.5%

• 12:30 British MPC Member Broadbent Speaks

• 13:05 US FOMC Member Clarida Speaks

• 19:00 US Federal Reserve Chair Powell Speaks

Tuesday (May 21)

• 6:00 British CBI Industrial Order Expectations. Estimate -6

• 10:00 US Existing Home Sales. Estimate 5.35M

Open: 1.2723 High: 1.2735 Low: 1.2685 Close: 1.2694

GBP/USD Technical

GBP/USD was flat in the Asian session and has edged lower in European trade

• 1.2615 is the next support level

• 1.2723 is a weak resistance line. It was tested earlier in the session

• Current range: 1.2615 to 1.2723

Further levels in both directions:

• Below: 1.2615, 1.2477 and 1.2401

• Above: 1.2723,  1.2841, 1.2910 and 1.3000