- GBP/USD declines to a week’s low near 1.3150 before London open on Tuesday.
- Negative news out of China and growing market support for the USD extended the pair’s recent downturn.
- With the UK Services PMI and testimony by the BoE’s Carney becomes crucial for the GBP, investors remain on the back foot ahead of the events.
GBP/USD stretched its previous downward trajectory to a week’s low near 1.3150 while heading into European session on Tuesday. The pair couldn’t withstand the USD’s across the board strength after China anticipated lower growth and China’s Caixin services PMI declined to three month low. Additionally, consensus favoring a trade accord between the US and China, coupled with the market rush to greenback expecting dovish ECB outcome, also weighed on the GBP/USD pair. Investors may now shift their attention to the UK economic calendar as it carries February month Markit Services PMI and BoE Governor Mark Carney’s testimony.
China’s National People’s Congress lowered down its 2019 gross domestic product (GDP) forecast to 6.0-6.5% range from ‘around’ 6.5% expectations for the year 2018 that flashed 6.6% growth. The parliament also promised more tax cuts during its annual meeting. While news of additionally weak GDP growth from world’s largest industrial player was already weighing on commodities and pushing markets to the US Dollar, Caixin released February month services purchasing manager’s index (PMI) for the February month that slipped to three month low of 51.1 against 53.8 forecast and 53.6 prior.
In addition to catalysts from China, traders also gave importance to speculations concerning this week’s monetary policy meeting by the European central bank (ECB). With a slew of downbeat domestic data, the ECB is under growing pressure to justify its strength in avoiding a regional slowdown. Given the Federal Reserve’s advantage of monetary policy divergence with the rest of the globe, pessimism surrounding the ECB outcome adds strength to the Fed-side currency namely the USD.
Recently, the Financial Times reported that the UK trade department cancels its Brexit briefings to the British business houses that in-turn challenged the British Pound (GBP).
Looking forward, February month release of the UK Services PMI, crucial to the British GDP, is up for release at 09:30 GMT today. The headline sentiment index may join Monday’s construction PMI and slip beneath the 50.00 mark which differentiates growth from contraction to 49.9 against 50.1 prior. Also, the Bank of England (BOE) Governor Mark Carney is due to testify on Brexit, inflation, and the economy before the House of Lords Economic Affairs Committee at 15:35 GMT. While the Governor is less likely to avoid the latest economic challenges and Brexit uncertainty, chances of his clear signal to monetary policy change are fewer.
From the US side, developments surrounding the US-China trade deal and President Donald Trump’s response to the opposition Democrat’s launch of “abuse of power” investigation will be closely observed.
GBP/USD Technical Analysis
The GBP/USD’s sustained trade beneath 1.3175 signal brighter chances of its further downturn to 1.3070, including 61.8% Fibonacci retracement of its June 2018 to January 2019 slide. However, multiple highs during February 1.3110 may offer intermediate halt to the decline.
Meanwhile, pair’s pullback needs to cross the 1.3175 barrier to confront the support-turned-resistance, at 1.3190. Also, the pair’s break of 1.3190 enables it to aim for 1.3260.