GBP/USD drops back below 1.2500 ahead of UK/US PMI

GBP/USD fizzles the recent upside momentum while declining to 1.2475, still gaining 0.05%, as heading towards the London open on Tuesday. The multidirectional news concerning the Sino-American trade relations recently entertained the market players. However, downbeat concerns relating to the UK’s efforts to tie-up with Japan and the European Union (EU) during the post-Brexit period seem to weigh on the quote. Even so, the pair traders are waiting for the key preliminary activity numbers from Britain and the US for fresh impulse.

Financial Times came out with the news that Japan wanted to rush through the trade deal with the UK and gave a six-week deadline. This exerts additional pressure on the British diplomats who are already struggling to break the Brexit deadlock. On the other hand, policymakers from the UK and the EU will fasten weekly Brexit talks to aim for a deal before the autumn. However, the UK Express cited a set of draft European Council conclusions to be adopted this week while saying, “capitals welcomed the UK and EU’s pledge to intensify efforts to reach an agreement this summer. But they will warn businesses and EU institutions that they should also ramp up preparations for a new trading relationship with Britain – including a no-deal.”

Elsewhere, the coronavirus cases from the UK have reached to the pre-lockdown period while rising 958 as per the latest update from the BBC. Furthermore, the Beijing-Britain tussle continues on the Hong Kong issue but developing trade ties with the EU and Japan seems to be the Tory government’s immediate agenda.

On the other hand, the US policymakers, including President Donald Trump, recently flashed mixed signals concerning their trade deal talks with China. The updates offered flash moves before settling around the early-day levels amid mildly risk-on sentiment.

Looking forward, June monthly preliminary Purchasing Manager Index (PMI) data from the UK will be the first to direct the pair ahead of the US PMIs. Forecasts suggest recoveries of the Manufacturing and Services PMIs could help the Cable extend the previous day’s gains.

Ahead of the release, FXStreet’s Joseph Trevisani says, “Markets are waiting to be convinced the economic catastrophe that overtook the UK economy in March and April reversed in May and that the climb from the pit is proceeding apace.  Consumers have played their part, these PMI numbers will tell if businesses have received the message.  The sterling and FTSE are waiting for the answer.”

Read: Markit UK PMI Surveys Preview: Consumers to business-can you hear me?

Technical analysis

In addition to a 100-day SMA level of 1.2500, a falling trend line from June 10, at 1.2538 now, also acts as an immediate upside barrier for the pair. Meanwhile, sellers will stay away unless the quote slips below 1.2330, a break of which could challenge the May month low of 1.2075.