GBP/USD pressured on weak UK data, risk-off

Amidst growing geopolitical tensions in the Middle East, risk aversion remains the driving force behind the financial markets. The GBP/USD pair hit a three-day low of 1.2113, with sellers aiming for the next support level at 1.2100.

The US economy is doing well, according to economic data; in September, new home sales increased by 12.3%.

According to UK data, the labour market is loosening up while the Manufacturing PMI remains in recessionary territory. The pair reached a two-week high of 1.2288 but was unable to break through the 1.2300 barrier, so it continued to lose money for two days in a row.

Geopolitical risks and fundamental news pressured the pound sterling. As of this writing, the pair is down 0.41%, trading at 1.2109. The weak UK data and geopolitical risks are a drag on the GBP/USD exchange rate.

US economic data from earlier in the New York session continued to show a strong national economy. According to the US Census Bureau, September new home sales increased 12.3% from the previous month’s -8.2% decline, surpassing August’s numbers.

According to S&P Global, business activity in the manufacturing and services sectors is still growing on Tuesday, even after the US Federal Reserve (Fed) tightened policy by 525 basis points.

Despite employment data suggesting an improving labour market, S&P Global reported that the Manufacturing PMI is still in recessionary territory, which has put the sterling on the defensive. At its next meeting on November 2, the Bank of England is expected to keep rates unchanged at 5.25%, according to growing rumours.

Because the US economy would be focusing on Q3 GDP, durable goods orders, and unemployment claims, the GBP/USD could ultimately continue to decline towards the 1.20 handle. Should the US GDP exceed forecasts, the GBP/USD exchange rate may experience additional declines.

The GBP/USD exchange rate exhibits a downward bias and has the potential to further decline if it breaches the low of 1.2089 on October 19. If the latter is breached, the pair will test the low of 1.2010 on March 15 and expose October’s low of 1.2037. Buyers might remain optimistic that 1.2200 will be reclaimed if, on the other hand, the major remains above 1.2100.