GBP/USD – BoE rate expectations pared back as PMIs point to recession

  • UK Services PMI falls to 48.7 (50.8 expected, 51.5 in July)
  • UK Manufacturing PMI falls to 42.5 (45 expected, 45.3 in July)
  • Cable tests support but rebounds for the third time

The UK services and manufacturing PMI surveys fell well short of forecasts this morning, the former deep into contraction territory.

What’s more, the weakness was widespread from new orders to hiring and prices paid, which suggests we’re not just talking about a blip in the data, but rather the prospect of a recession in the second half of the year.

From the Bank of England’s perspective, there’s a lot within the data that will be viewed as encouraging, with slower employment resulting in less tightness in the labor market and lower prices paid across manufacturing and services sectors indicating easing inflationary pressures, in theory at least.

The surveys alone won’t be enough to convince the MPC and another rate hike in September looks a near-certainty but beyond that, traders have been paring back expectations on the back of these releases, with only one more then priced in this year.

A bearish or bullish signal for cable?

The pound headed lower after the report having drifted higher over the last week or so but once again it ran into trouble around a previous support level.


Source – OANDA on Trading View

That level is just above 1.26 where it also rebounded off a little over a week ago and a little over a week before that. This is clearly now a very notable support level, one which if broken could send a strong bearish signal.

What’s interesting is that it’s now rebounded back into the 55/89-day simple moving average band and a close within this would further suggest there’s still plenty of support around this important support zone too. This was a crucial support zone a few months ago and it’s proving so again.

To the upside, 1.28 continues to look significant, having provided plenty of resistance over the last few weeks and it also roughly coincides with the 38.2% Fibonacci retracement level.

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam