- GBP/USD Remains Strong Ahead of US Federal Reserve Board Decision.
- A busy US economic calendar did little to help the US dollar, which remained under pressure in a risk-averse scenario.
- UK PMI improved but remained in contraction territory for the sixth month in a row ahead of Thursday’s BoE meeting.
GBP/USD fell for a third day in a row, gaining 0.22% on Wednesday. With the US Federal Reserve Board (Fed) decision looming, financial markets have a risk-off impulse. Most safe-haven peers still dominate, with the exception of the United States Dollar (USD). GBP/USD is therefore trading around 1.2320 seconds, just above the 20-day Exponential Moving Average (EMA).
Data from the US are largely ignored by traders who are focusing on the Fed
British pound (GBP) continues its early gains following the release of US economic data. The ADP National Employment Change report says private employment last month he increased by 106K, below the predicted 178K. Recently, the S&P Global Manufacturing PMI for January rose by 46.9 above an estimated 46.8, suggesting factory activity is starting to improve, although the pace has slowed.
A subsequent report by the Institute for Supply Management (ISM) saw the January PMI fall further, falling to 47.4 for the third consecutive month from 48.4 in December, pushing the index to its lowest level since May 2020. It became clear. At the same time, the JOLTs report said his December opening numbers rose to 11.01 million, beating his estimated 10.25 million.
GBP/USD failed to gain the traction to test the daily high of 1.2345 despite most of the released US data being worse than expected.
On the other side of the pond, the UK economic docket presents the S&P Global/CIPS Manufacturing PMI for January, strikingly above expectations at 46.7 at 47 but remaining in contraction territory for the sixth straight month. The positive news in the report was that costs are slowing and supply chain pressures are easing.
In Brexit news, sources say the EU will allow goods from the UK to flow into Northern Ireland, while allowing goods destined for export to the Republic of Ireland to undergo inspection at Northern Irish ports. It reportedly accepted the UK customs proposal to do so. There were reports that both sides wanted an agreement by April 25th. It should be noted that the GBP barely reacted to the news, even though Brexit headlines crossed the screen.
Separately, the Bank of England is expected to raise interest rates by 50 bps at its first monetary policy meeting of 2023 on Thursday. Therefore, GBP/USD price action remains volatile and traders should keep an eye on the consequences of both monetary policy decisions. .
GBP/USD Technical Analysis
Technically speaking, GBP/USD has resumed its uptrend at the risk of a central bank decision, increasing volatility from today until this Friday. On the downside, the 20-day EMA at 1.2286 will be the first significant support and a break will open the door for further declines. It is difficult to break above the confluence of the 50-day EMA and the 100-day EMA near 1.2139. Meanwhile, the first resistance for GBP/USD is at 1.2400, followed by a strong 1.2500 mark.