The British pound has gained ground on Thursday. In the North American session, GBP/USD is trading at 1.2536, up 0.34%. Earlier today, the pound touched a high of 1.2569, its highest level since September 6th.
UK PMIs Improve
The UK released manufacturing and services PMIs earlier today, and both PMIs improved and beat expectations, which has given the British pound a boost.
The manufacturing PMI rose to 46.7 in November (Oct. 44.8), above the market consensus of 45. The services PMI improved to 50.5 (Oct. 49.5), beating the market consensus of 49.5. Manufacturing continues to decline, but the silver lining was that this release was the slowest decline in five months. Still, employment levels and new orders continue to fall, a result of weak demand. The services PMI managed to push into growth territory, but barely. The 50 line separates contraction from expansion.
The weak PMIs are further evidence of a weak UK economy, which has cooled down due to the Bank of England’s aggressive tightening. That has pushed inflation lower, although the current clip of 4.6% remains more than double the 2% target.
The markets are hopeful of rate cuts next year, even though BoE Governor Andrew Bailey continues to insist the BoE has no plans to trim rates. With inflation still high and the battle far from won, Bailey would risk losing credibility if he were to hint at rate cuts and then have to raise rates if inflation unexpectedly climbed higher.
US markets are closed for Thanksgiving, but the markets will be keeping a close eye on US manufacturing and services PMIs, which will be released on Friday. Both PMIs are expected around the 50.0 line, which separates contraction from expansion. If the reports are weaker than expected, we could see the US dollar slip, as expectations will likely rise regarding rate cuts next year.
GBP/USD Technical
- GBP/USD put pressure on resistance at 1.2575 earlier. Above, there is resistance at 1.2687
- 1.2476 and 1.2394 are the next support levels
