GBP/USD Holds Within a Range While the Dollar Attempts to BounceA range has developed in GBP/USD since yesterday while the dollar is strengthening on the back of a shift to risk aversion.
GBP/USD pushed firmly higher in the early week after testing lows not seen since the start of the month. However, the upward momentum quickly faded and the pair has fallen into a range near 1.2530 resistance.
PMI data out of the UK yesterday showed the economy recovering for a second consecutive month. However, what stood out the most from the report is the difference in views as to how that translates into GDP growth. Analysts from reporting agency IHS Markit expect a much more modest 4.9% rebound in GDP growth next year which is quite a bit lower than what the Bank of England is predicting.
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Similar to the UK, PMI data released from the US also showed further improvement in the economy. The US manufacturing PMI printed at 49.6 while the services PMI recovered to 46.7.
UK Prime Minister Boris Johnson has announced a further easing of lockdown measures that narrows the social distancing requirement from 2 meters to 1 meter. Further, several venues will be reopening such as pubs, hotels, and hair salons although there will be safety guidelines on how these businesses are to operate.
The economic calendar for the session ahead is light and this could lead to narrow ranges for the major currency pairs.
GBP/USD is already seen trading within a range with resistance near 1.2530 proving to be a hurdle. This same level had previously offered support around the middle of the month.
If the pair is able to rally above 1.2530 on a sustained basis, it could extend gains towards the 1.2675 area which acted as resistance a few weeks back.
To the downside, range support is seen at the June 15 spike low of 1.2455.
The S&P 500 is set to open nearly 1% lower and this shift to risk aversion has underpinned the dollar. How the markets react after the open stands to impact the dollar and the major currency pairs.
- GBP/USD has fallen into a range. With a light economic calendar today, range trading stands to continue.
- The dollar is recovering after posting two straight days of declines as the equity markets have come under pressure.
For a look at all of today’s economic events, check out our economic calendar.