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  • UK’s business activity fell significantly in September, indicating a struggling economy.
  • Truss is fighting to regain popularity after a tumultuous first month.
  • Analysts expect further weakness in the pound.

Today’s GBP/USD forecast is slightly bearish after poor economic data from the UK. Last month saw the steepest decline in activity in the British private sector since a COVID lockdown at the beginning of last year, highlighting Prime Minister Liz Truss’s difficulty.

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The S&P Global UK Composite Purchasing Managers’ Index’s final reading dropped from 49.6 in August to 49.1 in September, marking the lowest reading since January 2021. Any reading below 50 indicates a decline in activity.

The biggest retailer in the UK, Tesco, provided a trading update that only heightened the sense of unease surrounding the economy’s precarious fall toward recession. The supermarket giant gave a lower-than-anticipated full-year profit forecast due to concern about how a worsening cost-of-living problem will affect consumer purchasing.

The pound barely reacted to the PMI data as Investors were more interested in Truss’s economic goals and the escalating indications of political unrest in her government. On Wednesday, Truss fought to regain her weakened influence after a chaotic first month in office by pleading with her party to stick together and help change the nation’s economy.

“We expect further significant weakness in the pound. With the UK still seeing recession and CPI inflation expected to peak lower than previously, we expect BoE rate hikes to fall well short of the Fed,” noted analysts at Wells Fargo.

GBP/USD key events today

Investors will pay attention to the construction PMI data from the UK, which measures the activity level of purchasing managers in the construction sector. The initial jobless claims report from the US will give insight into the labor market.

GBP/USD technical forecast: Bulls are losing momentum below the 1.1503 resistance level

GBP/USD forecast

The 4-hour chart shows the price trading above the 30-SMA and the RSI above 50. The bulls are in charge but are coming up against strong resistance at 1.1503. The first time the price got close to this level, bears came in and pushed it toward the 1.1202 support level. This is also close to the 30-SMA.

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If bulls can respect the SMA as support, the price will likely retest and break above 1.1503. However, if bears are stronger, the price might break below the SMA and plunge toward the 1.0901 support level.

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