- The GBP/USD outlook indicates growing concerns about the UK economy.
- The UK services PMI eased from 52.8 to 51.2.
- The pound rallied after Trump announced a trade deal with Japan.
The GBP/USD outlook indicates growing concerns about the UK economy following PMI data, which has put a lid on the pound’s gains. Business activity in the country grew only weakly, increasing pressure on the Bank of England to lower borrowing costs. Meanwhile, market participants continue watching trade developments that have recently boosted risk appetite.
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Data on Thursday revealed that business activity in the UK grew weakly. Notably, the services PMI eased from 52.8 to 51.2. Meanwhile, economists had expected the figure to hold at 52.8. The weak business activity data follows other economic reports, which show slow pay growth and a contraction in the economy. Although the UK has already secured a trade deal with the US, the economy is struggling, which could force the central bank to implement more rate cuts. Market participants are pricing an 80% chance of a cut in August.
Meanwhile, the pound has rallied recently, along with other risk assets, following Trump’s announcement of a trade deal with Japan. The news eased worries about a global trade war. At the same time, reports indicate that a deal with the EU may be forthcoming, which could further boost risk appetite.
GBP/USD key events today
- US unemployment claims
- US flash manufacturing PMI
- US flash services PMI
GBP/USD technical outlook: Sellers emerge near 1.3600 resistance
On the technical side, the GBP/USD price has pulled back after nearing the 1.3600 key resistance level. However, it still trades above the 30-SMA, showing bulls are in the lead. Meanwhile, the RSI trades above 50, supporting bullish momentum.
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The rally started recently when the previous decline paused near the 1.3400 key support level. Bulls took over by pushing the price above the 30-SMA and have maintained a steep rally. After such a sharp move, the price might need to pause and retest the SMA before continuing higher.
A break above the 1.3600 key level would strengthen the bullish bias and allow GBP/USD to reach the 1.3750 key resistance level. However, bears have formed a strong candle at the top of the rally, which could shift the sentiment. Still, the bullish bias will remain intact as long as the price stays above the 30-SMA.
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Saqib Iqbal
