- Brexit headlines continue to weigh on GBP.
- Upbeat PMI data from the U.S. help greenback stay strong.
- US Dollar Index remains on track to record its highest daily close in more than two months.
After rising above the 1.30 mark on Tuesday on headlines pointing to the EU’s willingness to offer a UK-wide customs union, the GBP/USD reversed its course today and fell to its lowest level since September 5 at 1.2887 in the NA session. As of writing, the pair was trading at 1.2893, losing 0.7% on the day.
Earlier today, The Times reported that the Brexit transition period could last years as it would be a “rolling” process that could stall at annual reviews. Although British Prime Minister Theresa May’s spokesman later said that the PM had been clear that she didn’t want to enter into an indefinite post-Brexit transition period, the pound sterling struggled to erase its losses. Markets are now waiting for Theresa May to appear before the 1922 committee, at which she could face a leadership challenge.
On the other hand, today’s data from the U.S. showed that the business activity both in the manufacturing and business sectors expanded at a faster than expected pace in October with the IHS Markit PMI (flash) figures beating analysts’ estimate. The US Dollar Index today rose to its highest level in more than two months at 96.53 to reflect the broad-based USD strength. As of writing, the index was up 0.45% on the day at 96.40.
Commenting on today’s PMI report, “The flash PMI surveys indicate that the pace of economic growth gained momentum again in October after having been subdued mainly by adverse weather in September. The headline PMI is running at a level broadly consistent with the economy growing at an annualised rate of 2.5%, boding well for another robust quarter of growth,” Chris Williamson, Chief Business Economist at IHS Markit, said.
Technical levels to consider
The pair could face the initial support at 1.2855 (Sep. 3 low) ahead of 1.2800 (Aug. 24 low) and 1.2720 (Aug. 10 low). On the upside, resistances could be seen at 1.2990 (daily high), 1.3035 (100-DMA) and 1.3080 (20-DMA).
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