MAs Keeping GBP/USD Down, With A Bearish Bias Towards UK Jobs and GDP Numbers Later in the Week

[[GBP/USD]] crashed down in the first half of September, as UK gilt yields were surging. The Bank of England intervened which calmed markets down and the GBP reversed, making some massive gains. This pair surged more than 11 cents higher, but last week, risk sentiment turned negative again and the GBP reversed lower from around 1.15.

Now this forex pair is testing the lows above 1.10, so let’s see if this level holds. Tomorrow we have the UK jobs report, while on Wednesday we have the GDP report from the UK, which will likely be negative and send this pair further down.

UK GDP (Wed):

Expectations are for GDP MoM in August to be flat with the 3M/3M rate at -0.2%. The prior report saw M/M growth of just 0.2% in July (vs. exp. 0.4%) with the UK economy unable to benefit from a post-bank holiday rebound after the Queen’s Jubilee marred the June release. This time around, analysts at Oxford Economics note that “there are grounds to expect a rebound in construction output, given the unexpected weakness of July’s outturn, but otherwise our expectations are set low”.

PMI data for August saw the composite metric slip into the contractionary territory at 49.6 (vs. 52.1 in July) with S&P Global noting that the data was consistent with the economy contracting at a modest quarterly rate of 0.1%. Other data points saw August retail sales decline by 1.6% with the ONS stating that “all main sectors (food stores, non-food stores, non-store retailing and fuel) fell over the month”.

In terms of guidance from the MPC, at the time of the September meeting, policymakers forecast negative growth of 0.1% in Q3 (vs the August Announcement’s projection of +0.4%), marking a second successive quarter of decline. However, the subsequent mini-budget and growth plan presented by the government has yet to be included in the MPC’s forecasts.