GBP/USD – British pound slides below 1.30 after soft services PMI

GBP/USD is sharply lower in the Tuesday session. In North American trade, the pair is trading at 1.2946, down 0.70% on the day. On the release front, British BRC Retail Sales sparkled with a gain of 1.8%, compared to the estimate of -0.2%. British Services PMI dropped to 50.1, shy of the estimate of 51.1 points. In the U.S., ISM Non-Manufacturing PMI dipped to 56.,7 shy of the estimate of 57.2 points. Later on Tuesday, President Trump delivers the State of Union address before Congress. On Wednesday, Federal Reserve Chair Powell will speak at an event in Washington.

The British pound headed lower on Tuesday, falling below the symbolic 1.30 level for the first time since January 23. The catalyst was a soft score of 50.1 from services PMI, which points to stagnation in the services sector. This marked the weakest reading since July 2016. Respondents in the PMI survey pointed to the turmoil around Brexit as the reason for the slowdown in the services sector.

British Prime Minister May will meet with EU Commissioner Jean Paul Juckner on Thursday, in a crucial meeting over the Brexit withdrawal deal. With Britain and the EU at an impasse over the Irish border stopgap, both sides will have show some flexibility to reach a solution that May can pass through parliament. May has said she wants to change the stopgap rather than eliminate it, but it’s questionable if the Europeans will be in a giving mood. If the meeting is not a success, expect the blame game between Britain and the EU to intensify, which could further dampen investor sentiment and weigh on the British pound.

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GBP/USD Fundamentals

Monday (February 4)

  • 19:01 British BRC Retail Sales Monitor. Estimate -0.2%. Actual 1.8%

Tuesday (February 5)

  • 4:30 British Services PMI. Estimate 51.1. Actual 50.1
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 57.2. Actual 56.7
  • Tentative – US IBD/TIPP Economic Optimism. Estimate 53.1
  • 21:00 US President Trump State of the Union Address

Wednesday (February 6)

  • 19:00 US Fed Chair Powell Speaks

*All release times are EST

*Key events are in bold

GBP/USD for Tuesday, February 5, 2019

GBP/USD February 5 at 12:20 EST

Open: 1.3036 High: 1.3054 Low: 1.2925 Close: 1.2944

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2729 1.2851 1.2910 1.3070 1.3170 1.3258

GBP/USD was flat in the Asian session. The trend continued in European trade and the pair then posted slight losses. The downward movement has continued in North American trade

  • 1.2910 is under pressure in support following sharp losses by GBP/USD on Tuesday
  • 1.3070 is the next resistance line
  • Current range: 1.2910 to 1.3070

Further levels in both directions:

  • Below: 1.2910, 1.2851 and 1.2729
  • Above: 1.3070, 1.3170 and 1.3258

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 and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.