- Firming expectations for negative BoE rates exerted some pressure on GBP/USD.
- Reviving safe-haven demand underpinned the USD and added to the selling bias.
- Better-than-expected flash UK PMI prints extended some support to the sterling.
The GBP/USD pair maintained its offered tone through the early European session, albeit recovered around 25-30 pips following the release of UK PMIs.
The pair witnessed some follow-through selling for the second straight session on Thursday and extended the overnight pullback from the vicinity of the 1.2300 mark. The mentioned level coincides with 100-day SMA, which has been acting as a key hurdle over the past two trading session and kept a lid on the GBP/USD pair’s recovery from multi-week lows set earlier this week.
The British pound was being weighed down by the fact that the Bank of England Governor Andrew Bailey – while testifying before the Treasury Select Committee on Wednesday – did not rule out the possibility of negative interest rates. Adding to this, a softer risk tone benefitted the US dollar’s safe-haven status and exerted some additional pressure on the GBP/USD pair.
Despite the negative factors, the pair managed to find some support near the 1.2185 region and edged higher in reaction to better-than-anticipated UK PMI prints for May. In fact, the flash version of the UK Manufacturing PMI came in at 40.6 as compared to 36 expected. The gauge for the services sector also surpassed expectations and rose to 27.8 from 13.4 previous.
Meanwhile, the uptick lacked any strong follow-through and did little to assist the pair to register any meaningful recovery amid concerns over a further escalation in the US-China disputes. In the latest US-China flashpoints, the US Senate passed a bill that could block some Chinese companies from selling shares on the American stock exchanges.
Moving ahead, market participants now look forward to the US economic docket – featuring the release of Philly Fed Manufacturing Index, Initial Weekly Jobless Claims and Flash Manufacturing PMI. The data might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.