GBPUSD drops after poor UK PMIs

<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
<ul>
<li>GBPUSD sinks after UK PMIs came in below expectations</li>
<li>Bank of England rate hikes are taking toll on UK economy</li>
<li>Bloomberg model: GBPUSD likely to trade between <strong>1.2545 – 1.2828</strong> into next week</li>
<li>Friday’s speech by Fed Chair Powell may herald more volatility for GBPUSD</li>
</ul>
<h3></h3>
<h3>The Pound is the worst-performing G10 currency against the dollar today.</h3>
<p>The <strong>UK’s preliminary PMIs</strong> (purchasing manager index) for August showed <strong>contracting conditions </strong>across both manufacturing and services in the private sector.</p>
<p>With the respective PMIs registering readings below the 50 threshold that differentiates contraction (PMI below 50) and expansion (PMI above 50) …</p>
<blockquote>
<h2><em>It’s clear that the Bank of England’s aggressive rate hikes are taking a toll on the UK economy.</em></h2>
</blockquote>
<p>Today’s PMI numbers have also prompted markets to <strong>dial down bets for a further 75-basis points in rate hikes out of the Bank of England</strong> which had been fully priced in prior to today’s PMI releases.</p>
<p>At the time of writing, markets are only pricing in a <strong>54% chance</strong> that the BOE can raise its benchmark rate by a <strong>further 75bps between now and Q1 2024.</strong></p>
<blockquote><p><em>Such soured sentiment surrounding the UK economy and the BOE’s future policy moves has clearly weighed on GBPUSD, forcing cable to unwind some of its recent gains.</em></p></blockquote>
<p>&nbsp;</p>
<h3><strong>GBP still among best G10 performers YTD</strong></h3>
<p>Though for proper context, Sterling continues to compete with the Swiss Franc for the title of best-performing G10 currency against the US dollar on a year-to-date basis.</p>
<blockquote><p><em>The <strong>CHF </strong>and <strong>GBP </strong>can still boast of a <strong>5% climb respectively </strong>against the greenback so far in 2023.</em></p></blockquote>
<p>&nbsp;</p>
<h3>From a technical perspective:</h3>
<p>GBPUSD bulls have been thwarted by the <strong>21-day simple moving average (SMA) </strong>of late. The <strong>38.2% Fibonacci level</strong> from this FX pair’s June 2021 – September 2022 plummet is also further exerting <strong>resistance</strong>.</p>
<p>To the downside, the <strong>1.26200 region</strong> has been offering support for GBPUSD (nicknamed “cable”) since end-June, with the <strong>100-day SMA </strong>also potentially offering further support nearby.</p>
<blockquote><p><em>Bloomberg’s FX model forecasts a <strong>74% chance</strong> that GBPUSD will trade within the <strong>1.2545 – 1.2828</strong> range over the <strong>next one week.</strong></em></p></blockquote>
<p><img decoding="async" fetchpriority="high" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user16/GBPUSDDaily_22.png" alt="" width="1024" height="768" data-entity-type="file" data-entity-uuid="fd42bec6-f49b-403f-87fb-0a962a9da851" data-src="/s3-static/users/user16/GBPUSDDaily_22.png" /></p>
<p>&nbsp;</p>
<p>Astute traders would be aware that this time period also includes <strong>Fed Chair Jerome Powell’s highly-anticipated speech </strong>at the Jackson Hole symposium this Friday, as well as the <strong>UK’s August consumer confidence data.</strong></p>
<blockquote><p><em>Of those two events, <strong>Chair Powell’s comments harbours the much greater potential to sway the US dollar,</strong> and by extension, GBPUSD as well as the rest of the FX world before the weekend.</em></p></blockquote>
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