GBP/USD Gives Up PMI Inspired Gains
Fiona Cincotta January 24, 2020 11:26 AM
Profit taking after a week of strong data
After surging to a high of $1.3164 in early trade this morning, GBP/USD quickly pared those gains and is currently trading 0.2% lower on the day as it tests support at $1.31
The whipsaw action in sterling came following PMI data and as investors attempt to second guess the BoE ahead of the rate decision next Thursday.
- Manufacturing 49.8 vs. 48.7 exp. (47.5 previous)
- Service sector 52.9 vs 51 exp. (50 previous)
- Composite 52.4 vs 50.7 exp. (49.3 previous)
The composite pmi reading, which is a useful gauge for economic output across the economy, jumped to its highest level in 2 years.
These are upbeat readings that show that the UK experienced a post-election Boris bounce, an encouraging start to the new year. The reading points to economic growth of 0.2% and has caused investors to scale back expectations that the BoE will cut interest rates when they meet on 30th Brexit.
The pound was unable to sustain gains as profit taking took over. The pound has been one of the strongest performers across the week heading into the PMI’s as investors started to price out the possibility of monetary policy easing by the BoE following upbeat labour market data & CBI figures earlier in the week.
Brexit is never far from any pound traders’ thoughts. The Brexit bill was signed off yesterday by the European Commission President Ursula der van Leynes. It will now go to the European Parliament on 29th January for ratification before Brexit next week on 31st January and the start of the all-important trade talks.
Levels to watch:
Pound’s sell ff has seen it slip through 200 sma on 4 hour chart. It remains above 100 & 50 sma. Momentum remains to the upside.
Immediate support can be seen at $1.3080 prior to $1.3050 before $1.2950 (Jan low).
Resistance can be seen at $1.3120, prior to $1.3150, $1.3170 (today’s high) before $1.3210 (high 6th Jan).
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.