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GBP/USD drops after strong US ISM Manufacturing PMI data

  • GBP/USD declines as strong US manufacturing activity and pricing pressures fuel speculation of a persistent Fed policy.
  • The resilience of the US economy, evidenced by ISM data, contrasts with quiet European markets due to holiday closures.
  • Upcoming UK PMI data releases could weigh the GBP/USD as market participants expect further deterioration.

The Pound Sterling slumps in the mid-North American session, as robust US economic data could dent the Federal Reserve’s intentions to cut rates. That underpinned the Greenback while US Treasury yields skyrocketed, a headwind for Cable. The GBP/USD trades at 1.2587, down 0.57%.

Pound Sterling treads water amid strong US Dollar and higher US yields.

A holiday in Europe keeps the financial markets closed. Across the Atlantic, data from the Institute for Supply Management (ISM) revealed that business activity in the US expanded in March for the first time since September 2022, suggesting the economy's resilience. The Manufacturing Purchasing Managers' Index (PMI) reached 50.3, surpassing the consensus of 48.4 and improving upon February's 47.8. Furthermore, the report highlighted an increase in the Prices Paid Index, which was its highest point since August 2022. Given the economy's better-than-expected performance, this resurgence in pricing pressures might hinder the Federal Reserve's inclination to soften its monetary policy.

Earlier, S&P Global announced a slight adjustment to March’s Manufacturing PMI for the United States, finalizing it at 51.9 compared to the initial reading of 52.2, around 13:45 GMT.

Following the data, money market traders slashed the odds for a Federal Reserve’s rate cut in June from around 60% to 56.9%, according to data from the CME FedWatch Tool.

Last week, Fed Chair Jerome Powell commented in a speech at the San Francisco Fed that the US central bank is in no rush to cut rates. Even though last week’s Core Personal Consumption Expenditure (PCE) price index came to a touch softer, the Consumer Price Index (CPI) remains above the 3% threshold. That would keep Fed officials with their hands tied and adhere to the higher for longer mantra.

On Tuesday, the UK economic docket will feature the release of Housing Prices, the BoE Consumer Credit, and the S&P Global Manufacturing PMI.

GBP/USD Price Analysis: Technical outlook

The GBP/USD exchange rate has broken the previous dynamic support level seen at the 200-day moving average (DMA) at 1.2857, opening the door for further losses. If sellers push the exchange rate below 1.2550,  the 1.2500 figure is up next. Otherwise, if the pair edges are higher than the 200-DMA, look for 1.2600 as the next supply zone, ahead of the 100-DMA at 1.2649.

GBP/USD

Overview
Today last price1.2549
Today Daily Change-0.0076
Today Daily Change %-0.60
Today daily open1.2625
 
Trends
Daily SMA201.2717
Daily SMA501.2676
Daily SMA1001.2657
Daily SMA2001.259
 
Levels
Previous Daily High1.2645
Previous Daily Low1.261
Previous Weekly High1.2668
Previous Weekly Low1.2586
Previous Monthly High1.2894
Previous Monthly Low1.2575
Daily Fibonacci 38.2%1.2632
Daily Fibonacci 61.8%1.2624
Daily Pivot Point S11.2608
Daily Pivot Point S21.2592
Daily Pivot Point S31.2573
Daily Pivot Point R11.2643
Daily Pivot Point R21.2662
Daily Pivot Point R31.2679

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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