GBP/USD – Pound Drifting, Investors Braced for Manufacturing and Services PMIs

GBP/USD

GBP/USD continues to trade sideways, in what has been a quiet week. Early in the European session, the pair is trading at 1.2915, up 0.03% on the day.

Will PMIs Wake up Sleepy Cable?

The trading week wraps up with British PMIs, which are key gauges of the strength of the services and manufacturing sectors. Recent data has been soft, and the markets are braced for weak initial readings for November (revised readings will be published in early December). Final Manufacturing PMI remains under the 50 level, which separates contraction from expansion. In October, the PMI improved to 49.6, but the initial reading for November stands at 48.8. The situation is only marginally better in the services sector. Final Services PMI for October came in at 50.0, pointing to stagnation. The initial reading for November is almost identical, at 50.1 pts. Any readings in contraction territory could weigh on the pound.

Tories Enjoy Lead in Polls

With the British election only a few weeks away, Prime Minister Johnson and the Conservatives are enjoying a comfortable lead in the polls. The Conservatives are favored by 44% of voters, with Labor at 28% and the Liberal Democrats at 16%. The election is likely to be a market mover for the pound, as the new government will have to immediately decide what happens with Brexit. Johnson continues to take a hard approach towards the EU, and has promised to take Britain out of the EU by January 31. Stay tuned!

Technical Analysis

With GBP to USD showing little change, our technical analysis remains in place. There is immediate support at 1.2910, which has remained relevant throughout the week. Below, there is support at the round number of 1.2800. On the upside, there is resistance at 1.2970, which is protecting the symbolic number of 1.3000. Above, we find resistance at 1.3100.

Calm Week for Pacific Currencies

It has been a quiet week for the Australian, New Zealand and Chinese currencies. The lack of activity has continued in the Asian session on Friday, and I do not expect much movement for the rest of the day. On Monday, New Zealand releases retail sales, so we could see some volatility from USD/NZD at the start of the week. There are no Australian or Chinese events on Monday, so the Aussie and yuan should be calm at the start of the week.