The GBP/USD pair will fluctuate today as traders respond to the British PMI figures and new trades.
The British Manufacturing PMI was 53.7, but there are concerns about a possible slowdown due to foreclosure.
The GBP/USD pair is also waiting for the U.S. elections and the Fed and Bank of England interest rates.
The GBP/USD exchange rate has changed little as traders react to the new foreclosure in Britain, the upcoming US elections, and the positive UK manufacturing PMI data. The pair is trading at 1.2938, which is much higher than the intraday low of 1.2854.
GBP/USD little change ahead of US elections and the BOE
British manufacturing sector recovers
The important manufacturing sector in the UK continued to recover in October, as in other European countries. According to Markit, the closely watched manufacturing PMI rose to 53.7 in October from 53.3 the previous month. This increase was better than the 53.3 that the analysts surveyed by Reuters had expected.
According to Markit, this improvement was due to new work being started and manufacturers catching up on existing orders that had been delayed during the initial lockdown. This demand came mainly from China and the United States.
The rise in the PMI was also due to manufacturers’ optimism. In fact, more than 60% of the companies surveyed expect their production to increase in 2020.
However, the companies in the sector are continuing to reduce their workforce. These cuts were more pronounced in the consumer goods industry. In a statement, Chris Williamson of Markit said
“In October, the UK manufacturing sector’s recovery continued, although the upturn lost momentum in the face of ongoing closures and signs that growth could weaken further in the months ahead following the replenishment of brexite inventories.
Robust production activity in other European countries
Great Britain was not the only country to record an improvement in production activity. This morning data from China showed that the manufacturing PMI jumped to 53.6. In the Euro-Zone, the PMI rose to 54.8 as most countries such as Germany, France, Italy and Spain performed well.
The biggest risk, however, is that the UK and other European countries will see an increase in Covid 19 cases. In the UK, the government has already announced a month-long freeze, which could wipe out progress in the sector.
Perhaps the GBP/USD has stabilized due to rising hopes of a brexite deal. As I wrote last week, sources have told the media that they are optimistic about a deal. In fact, some sources have told Bloomberg that both sides have even started drafting divorce documents.
The couple are also waiting for the outcome of the US election, the Fed and Bank of England and Federal Reserve interest rates, and the numbers on the payroll of non-farmers from the US.
Technical Outlook GBP/USD
Technical Table GBP/USD
On the daily chart, we can see that the GBP/USD pair is above the green ascending channel that connects the May, July and September lows. The price ranges between the 61.8% and 78.2% Fibonacci retracement levels and moves along the 15-day and 25-day exponential moving averages. It also appears to have formed a bearish flag pattern, which is shown in red. Therefore, I expect the pair to break down in close proximity as the bears seek the next support at 1.2657.