- GBP/USD remains under pressure for the third consecutive day.
- Doubts surrounding the UK PM’s victory in the December election, increasing odds of the US-China deal weigh on prices.
- UK Services PMI, US data will keep traders entertained while trade/Brexit headlines could occupy the driver’s seat.
Other than trade positive sentiment, recent uncertainties surrounding the UK PM Johnson’s victory in the snap election also weigh on the GBP/USD pair as it declines to 1.2880 ahead of the London open on Tuesday.
Be it the trade positive statements from the United States (US) President Donald Trump or Financial Times (FT) headlines indicating the US administration considering to roll back some of its earlier tariffs on China, everything boosts the odds of an initial trade deal between the US and China.
While the same is more playing positive for the US Dollar’s (USD) present run-up, downbeat political plays in the United Kingdom (UK) contribute to the pair’s weakness. A Labour-party member as the House of Commons’ speaker and questions over the Prime Minister’s (PM) role in silencing reports about Russian intervention in British politics seem to signal additional hardship for the UK citizens. Also increasing the pessimism is the Brexit party leader Nigel Farage’s latest swing to put nearly 600 candidates for the upcoming snap election in December to cut votes from the Conservatives and hold a command in negotiations.
Although the October month reading of Services Purchasing Managers Index (PMI) from the UK will be in the spotlight for the British Pound (GBP) traders, ISM Non-Manufacturing PMI, second-tier jobs data and trade balance will decorate the US economic calendar.
“We look for the services PMI to dip slightly further into contraction territory at 49.2 in October (mkt 49.7). While the manufacturing PMI managed to bounce a bit on an inventory building ahead of the 31 October deadline, as it did in March 2019, the services PMI actually performed the worst out of the three PMIs in March, so we think has a bit more downside potential no,” says TD Securities concerning the UK PMI. On the other hand, Westpac has something to say for the US data, “the US data focus is the Oct non-manufacturing ISM survey. The consensus is for an improvement in the overall index from 52.6 (a low since 2016) to 53.4. The US Sep trade balance is also due, expected around -$53bn.”
Technical Analysis
Only if the pair declines below 1.2787/75 area including 21-day Simple Moving Average (SMA), June high and October 24 low, the quote can revisit late-September levels near 1.2580 otherwise chances of its another run-up to 1.3000 prevail.
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