GBP/USD Sinks as UK PMI Disappoints, EUR/GBP Eyes Bearish Continuation -


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The GBP entered the European session eyeing further gains against both the greenback and Euro. However, lackluster data for the Euro Area was followed up by disappointing UK PMI numbers which saw the Pound face renewed selling pressure as the European session gained traction.


The UK private sector is starting to show signs of the effects of interest rate hikes by the BoE over the past 18-months as output recorded its weakest rise in 6 months. The data highlighted a considerable slowdown in business activity growth as new orders flatlined and backlogs of work diminished. On a positive note, though delivery time from suppliers recorded its biggest improvement since the index began in 1992.


Full PMI Report: S&P Global / CIPS Flash United Kingdom PMI

Today’s data is unlikely to make the Bank of England’s (BoE) job any easier as the inflation conundrum rumbles on. Last week’s drop in inflation remains a positive but today’s comments by Chris Williamson, Chief Business Economist at S&P Global Market Intelligence is likely to weigh on sentiment. Williamson stated that the UK economy came close to stalling in July, combined with gloomy forward-looking indicators, reignites recession worries. These comments are surely going to play on the minds of the BoE MPC heading into next weeks meeting. It is clear that rate hikes are needed and while wage growth remains strong, recessionary fears will no doubt be heightened following today’s data.

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The next two weeks are dominated by Central Bank meetings with UK data rather sparse this week. Most of the high impact data events this week come from the US which could drive Cable prices ahead of the BoE meeting next week. We do have the European Central Bank (ECB) meeting this week and following positive signs of disinflation we have heard slightly dovish comments from ECB policymakers. The ECB also have a challenging task on their hands as the Euros strength this year appears to be weighing on exports in particular. The rhetoric and any forward guidance from President Christine Lagarde and ECB policymakers could be key to the Euro for the rest of 2023.

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GBPUSD has been ticking lower since refreshing its YTD high on July 13. This morning’s selling pressure pushing cable to retest the 1.2800 area before a modest bounce to trade at the 1.2830 handle at the time of writing. Cable is on course for its seventh consecutive day of losses.

Despite the overwhelming selling pressure at the moment a key area of dynamic support is provided by the ascending trendline. A third touch of said trendline could see cable push for fresh highs above the 1.3200 handle. A deeper pullback would see the 200-day MA at 1.2663 come into focus. Cable remains in a bullish trend until a daily candle closes below the 1.2600 handle.

Key Levels to Keep an Eye On:

Support levels:

  • 1.2800
  • 1.2700
  • 1.26563 (50-day MA)

Resistance levels:

  • 1.2900
  • 1.3000 (psychological level)
  • 1.3150 (YTD High)

GBP/USD Daily Chart


Source: TradingView, Prepared by Zain Vawda

EURGBP is an intriguing one following significant gains for the GBP since early February. We have since staircased lower before bottoming out at the 0.8500 handle with last week’s UK inflation facilitating a pullback.

The fundamentals in particular seem to support further gains for Cable and is unlikely to change right now. Price is currently stuck between the 50 and 100-day MAs with a break below the 0.8600 support likely to result in an acceleration toward fresh lows below the psychological 0.8500 handle. A daily candle close above the swing high around 0.8730 would invalidate the bearish bias.

EUR/GBP Daily Chart


Source: TradingView, Prepared by Zain Vawda


IGCS shows retail traders are currently LONG on EURGBP, with 58% of traders currently holding LONG positions. At DailyFX we typically take a contrarian view to crowd sentiment, and the fact that traders are long suggests that EURGBP may enjoy a short bounce before continuing to head lower toward the 0.8500 psychological level.

— Written by Zain Vawda for

Contact and follow Zain on Twitter: @zvawda

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