GBP/USD Boosted by Positive UK Data and Dollar Weakness

GBP/USD has essentially traded sideways over the past three sessions. The pair traded at its best level on Thursday but fell back a bit since then as the dollar attempted to recover. Upward momentum is seen in early trading on Thursday, hinting that the pair is ready to resume within its broader uptrend.

Economic data from the UK was positive as the latest PMI figures showed the services and manufacturing sectors expanding at the fastest pace in five years. The rebound is attributed to the easing of lockdown restrictions that began in the first week of July.

While the data points to strength in the UK economy, the labor market will be closely watched. The unemployment rate has held up well, mostly as a result of government programs enacted during the virus outbreak. Government support is set to expire in October.

The US will release its latest PMI report later in the North American session. As well, the ADP will release employment data for June. The ADP often sets the tone for the more widely watched Non-farm payrolls report which is scheduled for release on Friday.

Technical Analysis

The upward momentum seen in early trading on Thursday hints that the correction from the highs on Thursday has completed and that the pair has returned to its bullish trend.

The equity markets are strongly bid in the early day, which underpins the exchange rate by correlation. Further, the US dollar index (DXY) is once again under pressure, also providing support to the currency pair.

DXY made a sharp push higher on Friday, but momentum stalled on Monday and sellers are once again dominating the index.

Ahead of the North American open, the dollar traded lower against all of its major counterparts.

Near-term support for the pair is seen at 1.3070 as this level has acted as both support and resistance over the past few sessions. It may take a drop below yesterday’s low to take a bearish view on the pair.

To the upside, the main hurdle comes at Thursday’s high around 1.3170. A break above it shows the next major level of resistance at 1.3200.

Bottom Line

• A broadly weaker dollar is pushing GBP/USD higher in early trading on Wednesday.
• PMI figures from the UK show a sharp rebound in the manufacturing and services sectors.

For a look at all of today’s economic events, check out our economic calendar.