- The UK manufacturing sector has jumped from contraction to expansion.
- Business activity in the UK services sector fell from 55.0 to 52.9.
- Prime Minister Rishi Sunak announced elections for July 4.
GBP/USD outlook remains bullish as pound bounces back from mixed PMI data. The pair is recovering after falling in the previous session due to a stronger dollar. Meanwhile, investors largely ignored news of the British election in July.
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PMI data from the UK on Thursday revealed that the manufacturing and service sectors both rose in the previous month. However, the manufacturing sector jumped from contraction to expansion, rising from 49.1 to 51.3. Meanwhile, activity in the services sector fell from 55.0 to 52.9, although it continued to grow. The mixed report barely had an impact on the pound.
Another key event largely ignored by traders was the news of the UK national election. Prime Minister Rishi Sunak announced elections for July 4. The pound held its ground near record highs after a warmer-than-expected inflation report. Moreover, services inflation remained flat, undermining some bets on a BoE rate cut in June.
Meanwhile, investors continued to soak up the hawkish sentiment on the minutes of the Fed meeting that boosted the dollar in the previous session. The minutes showed that policymakers believed inflation would continue to ease. However, some were prepared to raise interest rates if price pressures remained stubborn.
However, the risk of a rate hike has dropped significantly following the latest inflation report. Investors are now hoping that the downward trend seen last year will continue.
GBP/USD key events today
- US unemployment claims
- US manufacturing PMI
- US flash services PMI
GBP/USD Technical Outlook: Signs of bearish reversal
On the technical side, the GBP/USD price is trading just above the 30-SMA with the RSI above 50, supporting the bullish bias. However, the slope of the bullish trend has become shallower, showing that the bulls are not making big swings above the SMA. This indicates a weaker bullish momentum.
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At the same time, the RSI made a bearish divergence with the price, indicating exhaustion in the uptrend. The bulls failed to break beyond the extension levels at 1.2750 and 1.618 Fib, which allowed the bears to create a bearish engulfing candle that could lead to a reversal. Bears will take over when the price drops below the 30-SMA. Otherwise, the bulls will continue the uptrend with a break above 1.2750.
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