GBP/USD Slips to 1.33 After 52.1 PMI Boost Fades as BoE Cut Bets Return
GBP/USD started the European session on a firmer footing but reversed gear pretty quickly, heading back down towards $1.3320...
Quick overview
- GBP/USD initially rose after strong UK PMI data but quickly fell back towards $1.3320.
- The UK Composite PMI exceeded expectations, driven mainly by the services sector, but rate cut expectations from the Bank of England are limiting the pound's upside.
- US labor data showed mixed results, with nonfarm payrolls slightly above expectations but an uptick in the unemployment rate, contributing to a cautious market tone.
- Technically, GBP/USD is attempting to stabilize around $1.3350, with support seen at $1.3310 and potential for a bounce if buying opportunities arise.
GBP/USD started the European session on a firmer footing but reversed gear pretty quickly, heading back down towards $1.3320 after those early gains fizzled out. The initial move up came after a surprisingly strong batch of UK PMI numbers, which briefly tickled markets and eased some of those worries about domestic momentum. S&P Global’s UK Composite PMI came in at 52.1, which was a bit better than forecasts of 51.4 and was even a bit of an improvement over October’s 51.2
The services sector – which makes up a big chunk of the UK economy anyway – was the real driver of that strength, while manufacturing also did a bit better than expected at 51.2. For a market that’s getting increasingly sensitive to growth signals, this data at least gave some people a glimmer of hope that things haven’t rolled over just yet.
BoE Rate Cut Expectations Continue to Cap Upside
That optimism didn’t last long, though – traders got their heads back down and started thinking about the bigger picture, which, let’s be honest, is still the Bank of England cutting rates by 25 basis points to 3.75%. Even when data beats forecasts, the expectation of a rate cut is still holding back the pound, and there are plenty of economists, including some at Jefferies, who think the BoE will ease policy more than markets currently expect. Against that backdrop, any short-term GBP rallies just aren’t having much staying power, and people started getting out of their positions pretty quickly after the PMI-driven move
US Jobs Data Keeps a Lid on the Dollar
Over on the US side of the GBP/USD pair, the dollar was still getting a bit of a boost from some fairly mixed but still resilient labour data. The nonfarm payroll numbers for November came in at 64,000, which was a bit higher than the 50,000 expected, but prior months were revised down, so it’s not all good news. The unemployment rate ticked up to 4.6% which again is a cool but not a sharp turn down.
This mix has just reinforced that cautious tone, and investors are still happy to hold onto their dollars as they weigh the possibility of slower growth against the Fed easing rather than just going full-on aggressive.
GBP/USD Technical Picture: A Bit of Support in Focus
Looking at the technical picture for GBP/USD, it’s currently trading around $1.3350, trying to stabilise after pulling back from the $1.3425 – $1.3450 resistance zone. Looking at a 4-hour chart, you can see some pretty decent long lower wicks near $1.3310 which suggests that dip buyers are stepping in to defend the trend support rather than just abandoning ship.
- 50-EMA: $1.3355
- 100-EMA: $1.3310
- Resistance: $1.3385 then $1.3425 – $1.3470
- Support: $1.3310 then $1.3265
The RSI is currently at 45 – not quite at the oversold mark yet, and so we’re seeing a bit of a cooling off in momentum, rather than a sharp reversal either.
Trade idea: – If you think GBP/USD is due a bit of a bounce, you could try buying a dip near $1.3310 and aiming for $1.3425, with a stop just below $1.3265
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