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  • UK manufacturing PMI comes in slightly better-than-expected but remained in contraction territory.
  • Brexit-related uncertainties/the ongoing USD bullish rum might keep a lid on any strong move up.

The GBP/USD pair quickly reversed an early European session dip to over three-week lows and jumped to the top end of its daily trading range, around the 1.2300 handle post-UK manufacturing PMI.
The pair extended its recent pullback from two-month tops and remained depressed through the early part of Tuesday’s trading session, falling to an intraday low level of 1.2260 in the last hour amid persistent Brexit-related uncertainties.

Slightly better UK PMI provides some respite

The downtick, however, lacked any strong follow-through selling, rather caught some bids at lower levels after data released from the UK showed that manufacturing PMI rebounded from a seven-year low level of 47.4 recorded in August.
In fact, contraction in the UK manufacturing sector activity unexpectedly slowed in September and the seasonally adjusted IHS Markit/CIPS UK PMI jumped to a four-month high level of 48.3 as against a reading of 47.0 expected.
However, the prevalent bullish sentiment surrounding the US Dollar, further fueled by a strong follow-through pickup in the US Treasury bond yields, might turn out to be a key factor that might keep a lid on any subsequent strength.
Hence, it will be prudent to wait for a sustained move beyond the overnight swing high – around mid-1.2300s – before positioning for any meaningful near-term appreciating move or the resumption of the recent upward trajectory.

Technical levels to watch