GBP/USD has started the new trading week on a positive note. Currently, the pair is trading at 1.3332, up 0.35% on the day.
PMIs head in opposite directions
Two critical sectors of the British economy are heading in opposite directions, according to the latest PMI reports. Manufacturing accelerated further into expansionary territory in October, as Manufacturing PMI rose from 53.3 to 55.2 points. This marked a 3-month high and easily surpassed the estimate of 50.5 points. Manufacturing has weathered the Covid storm nicely, with the PMI rebounding after posting declines earlier in the year. However, it should be pointed out that the strong October release can be attributed to an increase in domestic and export orders ahead of the Brexit deadline in just five weeks.
It was a different story entirely in the services sector. The Services PMI slowed to 45.8, which was a sharp drop from the previous reading of 55.1 points. After rising to 60.1 in July, the PMI has dropped over three straight months and finds itself in contraction territory, below the neutral-50 level. Business activity was hit particularly hard by the lockdowns earlier in the year, with the PMI fell as low as 12.3 in March, marking a massive contraction in service sector output.
Markets hopeful for Brexit breakthrough
There has rarely been a dull moment in the Brexit saga since the stunning referendum back in June 2016. There was another twist late last week, as face-to-face talks had to be suspended when a Eurozone negotiator contracted Covid. Virtual negotiations are continuing, and the British media is reporting that a deal is 95% complete. At the same time, there are still some outstanding issues, such as fishery rights. With the UK poised to set sail from the EU on December 31st, it will be no mean feat to hammer out a deal in time.
- There is support at 1.3201, followed by a support line at 1.3110
- GBP/USD faces resistance at 1.3347, followed by resistance is 1.3422
- The pair remains slightly above the 10-day MA line
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