- UK businesses experienced another drop in activity this month.
- Investors are awaiting the BOE policy meeting next week.
- The UK’s labor market lost some of its inflationary momentum in the three months to August.
Despite recent downbeat UK data, the pound held near recent highs as the dollar weakened on falling treasury yields, keeping the GBP/USD price analysis bullish. Notably, a survey released on Tuesday revealed that UK businesses experienced another drop in activity this month. Moreover, cost pressures have continued to ease. This report highlights the risk of a recession as the Bank of England’s interest rate decision approaches next week.
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Meanwhile, more data on Tuesday indicated that the UK’s labor market lost some of its inflationary momentum in the three months to August. Consequently, it could support the Bank of England keep interest rates unchanged next week.
Economist Thomas Pugh from RSM commented, “We doubt that the new statistics will lead the Bank of England to resume its tightening cycle at its next meeting.”
Elsewhere, a Reuters poll of economists published on Tuesday revealed that most economists believe the Bank of England will maintain its bank rate at 5.25% on November 2. Nevertheless, central bank officials remain concerned that strong wage growth could entrench inflationary pressures in the economy.
Data published last week indicated that average earnings, excluding bonuses, were 7.8% higher in the three months to August. It marked the first decline in the pace of growth since January. However, it was only slightly down from a record 7.9% in the three months to July. Financial markets showed little immediate reaction to Tuesday’s data.
GBP/USD key events today
Traders are waiting to see the level of business activity in the US services sector. They will be eying:
- The S&P Global Services PMI report.
GBP/USD technical price analysis: Bulls prompt a shift in sentiment.
The pound is on a strong, bullish move that saw the price break above the 1.2200 resistance level. At the same time, the RSI finally crossed above 50 after consolidating for some time below the pivotal level. This cross indicates a shift in sentiment to bullish.
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Moreover, below the 1.2200 key level, the price mostly respected the 30-SMA as resistance. However, the cross above the SMA allowed bulls to take over and break out of consolidation. With this new bullish bias, the price will likely soon retest the 1.2300 resistance.
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Saqib Iqbal
