GBP/USD retreats towards 1.1250 as UK’s political optimism fades, economic woes unearth

GBP/USD dribbles around 1.1280 as fears surrounding the UK’s economic conditions probe the pair buyers after a two-week uptrend. The Cable pair retreats from a one-week top during Tuesday’s Asian session.

The quote extended the previous gains on Monday amid hopes of sound economic policies from ex-Chancellor Rishi Sunak as he will be the next British Prime Minister after Liz Truss’ shortest serving time. The Tory member turned down the need for general elections, saved the nation from another time-consuming method, and increased optimism initially.

However, the fears that Sunak’s leadership isn’t the only cure for the British economy amid downbeat numbers and fears of the Bank of England’s (BOE) restrain to act seemed to have weighed on the GBP/USD prices.

As per the first readings of the UK S&P Global PMIs for October, the Manufacturing activities’ gauge dropped to 45.8 versus 48.0 expected and 48.4 prior while its services counterpart slid to 47.5 from 50.0 previous reading and 49.0 market forecasts. With this, the Composite PMI for the said month declined to 47.2 compared to 48.1 anticipated and 49.1 prior.

Following the data, Bank of England (BoE) Deputy Governor Dave Ramsden said on Monday that PMIs are consistent with the UK economy being in recession.

On the other hand, the US S&P Global PMIs for October suggest that the Manufacturing activities’ gauge dropped to 49.9 versus 51.2 expected and 52.0 prior while its services counterpart slid to 46.6 from 49.3 previous reading and 49.2 market forecasts. With this, the Composite PMI for the said month declined to 47.3 compared to 49.1 anticipated and 49.5 prior.

It should be noted that the mixed feeling in the markets amid an absence of Fed speakers and geopolitical concerns surrounding China and Russia also weigh on the GBP/USD prices.

Amid these plays, Wall Street closed with gains while the US Treasury yields also ended the day on the positive side after a downbeat start.

A light calendar on Tuesday may allow GBP/USD bulls to pare some of their recent gains. Also, recently increasing hawkish Fed bets could weigh on the prices ahead of the key US Gross Domestic Product for the third quarter (Q3).

Technical analysis

GBP/USD pair’s failure to provide a daily closing beyond a six-week-old resistance line, near 1.1285 by the press time, as well as the 50-DMA hurdle surrounding 1.1400, keeps sellers hopeful of revisiting the monthly support line near 1.1085.