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Pound rebounds on strong Mfg. PMI

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The British pound has started the new trading week in positive territory. GBP/USD is trading at 1.3672, up 0.37% on the day.

Manufacturing stellar but services slip

The UK Flash PMI reports for August were mixed. Manufacturing PMI was down slightly, to 60.1 (July final: 60.4). Although a 5-month low, this read indicates strong expansion as it is well above the neutral 50-level. Consumer demand remains strong, but manufacturers are having trouble keeping up due to shortages of raw materials.

The news was not as good from the services sectors, which slipped to 55.3, a 6-month low (July final: 59.6). The sharp slowdown was a reflection of supply chain problems and staff shortages. As with manufacturing, businesses were unable to keep up with customer demand, resulting in backlogs. Still, even with this slowdown, business activity remains well into expansionary territory. Meanwhile, the CBI survey of manufacturers’ economic expectations, which was mired in negative territory for some 24 months, posted its fourth straight month of expansion. This is another indication of a robust manufacturing sector.

The British pound started the week on the right foot, as the PMIs continued to point to expansion. As well, the markets are in risk-on mode, which has curbed the dollar’s upswing which we saw last week.

The Federal Reserve will remain in the spotlight this week, with Jerome Powell delivering a much-anticipated speech on Friday at the Jackson Hole Symposium. With the delta variant of Covid continuing to grab the headlines and make investors jittery, Powell may opt to deliver a dovish message with regard to tapering. Investors are responding by purchasing Treasuries and technology stocks. If Powell’s speech is dovish, Jackson Hole could end up being a negative market-mover for the US dollar.

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GBP/USD Technical Analysis

 

  • GBP/USD is facing resistance at 1.3800. Above, there is resistance at 1.3977
  • On the downside, 1.3659 is the first line of support. This is followed by support at 1.3524

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
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