GBP/USD hangs near two-month lows, below 1.2700 mark post-UK PMIs

• GBP/USD witnessed some follow-through selling for the fourth consecutive session.
• Softer UK Services PMI did little to impress bulls or provide any respite to the pair.
• The set-up favours support prospect for a slide, even below the 1.2600 round-figure.

The GBP/USD pair maintained its offered tone near two-month lows, below the 1.2700 mark and had a rather muted reaction to the UK macro data.

The pair prolonged its recent rejection slide from the key 1.3000 psychological mark and remained under some selling pressure for the fourth consecutive session on Wednesday. Even though the BoE Governor Andrew Bailey downplayed expectations of negative interest rates, the British pound struggled to attract any meaningful buying amid persistent Brexit-related worries.

Adding to this, the UK Prime Minister Boris Johnson announced a slew of new restriction for England to contain a fresh spike in the number of COVID-19 cases. Johnson also warned to introduce greater restrictions if there is no improvement in the pandemic situation, which, in turn, kept the GBP bulls on the defensive through the first half of the trading action on Wednesday.

On the economic data front, the flash version of the Markit UK Services PMI fell short of market expectations and fell to 55.1 for September from 58.8 previous. Separately, flash UK Manufacturing PMI came in at 54.3, matching consensus estimates, albeit was still below the previous month’s final print of 55.2 and did little to impress the GBP bulls.

On the other hand, fears of renewed lockdown measures – amid the ever-increasing coronavirus cases – continued driving some haven flows towards the US dollar. A broad-based USD strength exerted some additional pressure and dragged the GBP/USD pair below the very important 200-day SMA for the first time since July.

The pair has now found acceptance below the technically significant moving average and now seems vulnerable to slide further. Hence, some follow-through weakness towards the 1.2600 mark, en-route the next major support near the 1.2550 horizontal support, now looks a distinct possibility.

Technical levels to watch