- The UK manufacturing sector jumped from contraction to expansion.
- Business activity in the UK services sector fell from 55.0 to 52.9.
- Prime Minister Rishi Sunak announced an election for July 4th.
The GBP/USD outlook remains bullish as the pound shrugs off mixed PMI data. The pair is recovering after dropping in the previous session due to a stronger dollar. Meanwhile, investors mostly ignored the news of a British election in July.
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PMI data from the UK on Thursday revealed that the manufacturing and services sectors both expanded in the previous month. However, the manufacturing sector jumped from contraction to expansion, rising from 49.1 to 51.3. Meanwhile, activity in the services sector fell from 55.0 to 52.9, although it remained expanding. The mixed report barely had an impact on the pound.
Another key event that traders mostly ignored was the news of a national election in the UK. Prime Minister Rishi Sunak announced an election for July 4th. The pound maintained its position near highs hit after a hotter-than-expected inflation report. Moreover, services inflation remained sticky, eroding some bets on a June BoE rate cut.
Meanwhile, investors were still absorbing hawkish sentiments in the Fed meeting minutes that strengthened the dollar in the previous session. The minutes showed that policymakers had faith that inflation would continue easing. However, some were ready to hike interest rates if price pressures remained stubborn.
However, the risk of a rate hike fell significantly after the latest inflation report. Investors are now hoping that the downtrend seen last year will resume.
GBP/USD key events today
- US unemployment claims
- US flash manufacturing PMI
- US flash services PMI
GBP/USD technical outlook: Signs of a bearish reversal
On the technical side, the GBP/USD price trades slightly above the 30-SMA with the RSI above 50, supporting a bullish bias. However, the slope of the bullish trend has become shallow, showing bulls are not making big swings above the SMA. This indicates weaker bullish momentum.
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At the same time, the RSI has made a bearish divergence with the price, indicating exhaustion in the uptrend. Bulls have failed to push beyond the 1.2750 and 1.618 Fib extension levels, allowing bears to make a bearish engulfing candle that could lead to a reversal. Bears will take over when the price breaks below the 30-SMA. Otherwise, bulls will continue the uptrend with a break above 1.2750.
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Saqib Iqbal
