|

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.

More from Christian Borjon Valencia
Share:

Editor's Picks

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10
Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.
 Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?
Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.