GBP/USD – Pound Dips as PMIs Disappoint

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Published: Dec 17, 2019, 08:11 UTC

After soaring above the 1.35 line, the pound has come back to earth this week. The U.K. releases key job numbers at 11:30 GMT, and weak numbers could send the pound to lower ground.

GBP/USD is steady in Tuesday trade, after sustaining considerable losses on Monday. Currently, the pair is trading at 1.3263, down 0.03% on the day.

The Pound – is the Party Over?

The British pound posted strong gains late last week, and even crossed above the 1.35 line in the post-election euphoria. This marked the currency’s highest level since May 2017. However, the currency has since retreated. The sudden gains by the pound provided a profit-taking opportunity, so a retreat was not a major surprise. More worrying, however, is weak British data which kicked off the week and could continue. The initial reading for Manufacturing PMI came in at 47.4, well shy of the forecast of 49.1 pts. This points to continuing contraction in the manufacturing sector. The Services PMI came in at 49.0, missing the estimate of 49.6 pts.

Later on Tuesday, the U.K releases key employment indicators, and the numbers are not expected to be pretty. Wage growth has been falling, and the October release is projected to slow to 3.4 percent. Unemployment rolls are expected to increase by 21.2 thousand, while the unemployment rate is forecast to hit 3.9%, up from 3.8%. This all points to weakness in the labor market, and investor sentiment could weaken and send the pound to lower ground.

Technical Analysis

After breaking past resistance lines last week, we have seen a retracement by GBP/USD. There is resistance at the round number of 1.3300, followed by 1.3380, which has switched back to a resistance line. On the downside, we find support at 1.3225, followed closely by support at the 1.3200 line.

Pacific Currencies – Summary

USD/CNY

The pair sustained sharp losses late last week, after reports that the U.S. and China had reached a trade agreement. However, USD/CNY has since chipped away at those losses, and is hovering around the symbolic 7.00 level.

AUD/USD

AUD/USD has lost ground on Tuesday. Currently, the pair is trading at 0.6858, down 0.39% on the day. The catalyst for the drop was a dovish message from the RBA, as the minutes of the last policy meeting indicated that the bank is prepared to cut rates early next year, if warranted by economic conditions.

NZD/USD

NZD/USD remains steady this week. Currently, the pair is trading at 0.6591, down 0.09%. The Westpac Consumer Sentiment jumped to 109.9, up from 103.1 pts. The ANZ Business Confidence index continues to improve, but remains in negative territory. The December reading came in at -13.2, up from 26.4 pts.

About the Author

Kenny Fisherauthor

Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.