GBPUSD Testing Support Following PMI Plunge

GBP Heavily SoldSimilar to what we’ve seen with EUR today, GBP has come under heavy selling pressure on the back of a dismal set of flash UK PMI readings this morning. The UK services PMI was seen falling back into negative territory this month at 48.7 from 51.5 prior and below the 50.9 the market was looking for. The drop marks the first decline since January and saw new orders falling to its lowest level since November 2022. Employment was also weak, rising at its slowest pace since March while service sector optimism was seen dipping to its lowest level since December 2022.Factory Activity PlungesAlong with the dip in services activity, the manufacturing PMI was seen falling further into negative territory, hitting 42.5 from 45.3 the prior month.  This marked the weakest manufacturing activity since the pandemic began in 2020. Reduced household incomes were cited as the main driver behind plunging new orders and a downturn in production volumes. There were some bright spots however, with lower energy and raw material prices seen amidst an improvement in supply chains.UK Recession RisksIn all, the composite UK PMI was seen at 47.9 from 50.8 prior, marking the sharpest contraction in private output since January 2021. UK recession risks are still a major concern and while the BOE recently shifted its view, no longer forecasting a recession this year, 2024 has been touted as a high-risk period for the UK. With UK rates set to tighten further alongside continued stickiness in inflation, UK growth risks remain pointed to the downside.Technical ViewsGBPUSDThe reversal lower in GBPUSD has stalled over recent weeks along support at the 1.2659 level. However, price has turned heavily lower this week and with momentum studies bearish, the market now looks vulnerable to a fresh break lower. Below current support, 1.2437 is the next support area to watch.