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Pound Sterling gains on slight expansion in flash UK PMI

24 Oct 2024

  • The Pound Sterling (GBP) has rebounded to approximately 1.2970 against the US Dollar (USD) during North American trading hours on Thursday, following a two-month low of around 1.2900 reached on Wednesday. The GBP/USD pair has appreciated as the US Dollar experiences a minor correction, with the US Dollar Index (DXY) falling to about 104.20. Nevertheless, the overall outlook for the US Dollar remains robust, attributed to a slight decrease in market anticipations regarding the Federal Reserve's (Fed) potential to lower interest rates in the upcoming policy meetings for the remainder of the year.
  • The CME FedWatch tool indicates that the probability of the central bank lowering interest rates by 50 basis points to a range of 4.25%-4.50% by the end of the year has decreased marginally to 68.3%, down from 71.7% the previous week. Additionally, the tool reveals that traders anticipate a 25-basis point rate cut in November; however, there is less certainty regarding a comparable adjustment in December.
  • Growing uncertainty for the United States (US) presidential election outcome, coming in less than two weeks, has also improved the US Dollar’s appeal as safe-haven. Latest national polls show a fierce competition between former President Donald Trump and current Vice President Kamala Harris
  • In the New York session on Thursday, investors will closely monitor the preliminary S&P Global PMI data for October, scheduled for release at 13:45 GMT. It is anticipated that the Manufacturing PMI will show a contraction, while the Services PMI is expected to indicate expansion, albeit at a reduced rate
  • Additionally, the Initial Jobless Claims data for the week ending October 18 has been reported at 227K, which is below both the estimates and the previous figure of 242K
  • Technical Analysis:
  • The Pound Sterling is currently at a critical juncture, positioned near the lower boundary of a Rising Channel chart pattern on the daily timeframe. The GBP/USD pair may encounter significant selling pressure if it is unable to maintain this level.
  • The short-term trend for the Cable has deteriorated further, having fallen below the 100-day Exponential Moving Average (EMA), which is situated around 1.2990.
  • The 14-day Relative Strength Index (RSI) has declined to approximately 35.00, indicating a prevailing bearish momentum.
  • In terms of support, the 200-day EMA, located near 1.2845, will serve as a crucial zone for Pound Sterling bulls. Conversely, on the upside, the Cable is likely to encounter resistance at the psychological level of 1.3000 and the 20-day EMA, which is around 1.3060.

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