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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

GBP/USD Daily chart

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.

GBP/USD

Overview
Today last price1.2523
Today Daily Change0.0083
Today Daily Change %0.67
Today daily open1.244
 
Trends
Daily SMA201.2474
Daily SMA501.2444
Daily SMA1001.2295
Daily SMA2001.1987
 
Levels
Previous Daily High1.2444
Previous Daily Low1.2348
Previous Weekly High1.2472
Previous Weekly Low1.2308
Previous Monthly High1.268
Previous Monthly Low1.2308
Daily Fibonacci 38.2%1.2408
Daily Fibonacci 61.8%1.2385
Daily Pivot Point S11.2377
Daily Pivot Point S21.2315
Daily Pivot Point S31.2281
Daily Pivot Point R11.2474
Daily Pivot Point R21.2507
Daily Pivot Point R31.257

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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