GBP/USD soars past 1.2500 on soft US manufacturing data, Fed skipping hike
|- GBP/USD rises amid weak US data and potential Fed policy pause.
- Despite ISM’s seven-month PMI slump, Wall Street remains positive.
- The UK faces steep housing price fall; high inflation triggers BoE tightening speculation.
GBP/USD edges higher in the North American session, boosted by downbeat economic data from the United States (US), with business activity slowing. Additionally, US Federal Reserve (Fed) officials pushing for a “skip” on its tightening cycle eased the odds for a rate hike at the upcoming June meeting. The GBP/USD is trading at around 1.2510s after hitting a low of 1.2400.
GBP/USD climbs, Fed considers pausing tightening cycle, and Wall Street reacts to ISM Manufacturing PMI’s seven-month decline
Wall Street shifted positively as data from the Institute for Supply Management (ISM) revealed that manufacturing activity slid for the seven straight month. The ISM Manufacturing PMI came at 46.9, below April’s 47.1 and below estimates of 47, with readings below 50 seen as recessionary. Factors like 500 basis points (bps) of aggressive tightening by the Fed weighed on the index as new orders plunged.
ISM data weighed heavily on the US Dollar (USD), as shown by the GBP/USD skyrocketing from around 1.2470, back above 1.2500, following the release of another two US employment reports, triggering a bounce from 1.2440 towards the former.
Regarding employment, the ADP National Employment Report showed private hiring rose by 278K in May, crushing estimates of 170K, but trailed April’s astonishing 291K. Although it showed signs the labor market remains tight, that was further confirmed by US unemployment claims.
Initial Jobless Claims for the week ended May 27 rose by 232K, below estimates of 235K, but above the prior’s week 230K, a figure downward revised.
Given the latest round of data, the Philadelphia Fed President Patrick Harker is expected to deliver some remarks late in the day. Nonetheless, GBP/USD traders should remember the latest statements by Fed Governor Philip Jefferson aiming for a skip to raise rates at June’s meeting, comments supported by Harker. Nevertheless, Harker added that incoming data could “change my mind.”
Across the pond, the UK calendar revealed that housing prices fell the most since 2009, blamed on higher interest rates by the Bank of England (BoE). The latest inflation report shows signs of easing but remains four times the BoE’s target. After the release of the Consumer Price Index (CPI), investors priced in additional tightening by the BoE.
GBP/USD Price Analysis: Technical outlook
The GBP/USD resumed its upward trajectory after spending two days glued to the bottom of the 20-day Exponential Moving Average (EMA) at 1.2441. Fundamental News sponsored Cable appreciation, and since it claimed the 1.2500 figure, the path of least resistance is north. The following resistance levels lie at the May 16 high of 1.2546 and the 1.2600 figure. Technical indicators, like the Relative Strength Index (RSI) and the 3-day Rate of Change (RoC), show that bulls are gathering momentum, so any pullbacks could be seen to re-engage on the overall uptrend.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.