November 29, 2022

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Pound dribbles lower as UK PMI readings disappoint

2 min read

Cable eases slightly to a session low of 1.3725

GBP/USD H1 23-07

The PMI report highlighted some concerns surrounding UK economic conditions to start Q3, with staff shortages and supply disruptions weighing on business activity.

On the former, the spread of the delta variant has led to a renewed surge in UK COVID-19 cases and that has led to new rules by the government forcing thousands of workers to self-isolate in order to try and limit the infection spread.

For some context, it is reported that more than 600,000 people were told to self-isolate in England and Wales in the past week.

That is casting a bit of a shadow to the recovery outlook that had looked so promising after the reopening in April and robust conditions in May.

Adding to that is supply disruptions resulting in the highest input cost rise in more than 20 years and that won’t help if it has spillovers to the consumer side. There’s also some businesses reporting of Brexit-related issues so that isn’t over as well.

In any case, put together all of that is seeing a dark cloud emerge going into the next BOE meeting on 5 August with the central bank also needing to balance all of that out with a surge in CPI figures in June here.

That said, economic momentum is arguably key and that may give pound buyers something to think about should data continue to disappoint in the weeks ahead.

For now, cable is down to a low of 1.3725-30 on the day as price falters upon testing the 61.8 retracement level of the recent downswing @ 1.3780.

The move back below the 200-hour moving average (blue line) also sees buyers surrender near-term control and price bias is now more neutral as such.

Hence, for any continuation towards the upside, buyers need to break above the 200-hour moving average @ 1.3760 and resistance at 1.3780.

Meanwhile, sellers need to push belwo the 1.3700 level and the 100-hour moving average (red line) @ 1.3690 to solidify any retest of the month’s lows again.

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