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the GBP/USD faces strong resistance at around 1.2500 and retraces due to market’s risk aversion as investors assess a possible recession in the United State.
The latest US economic data paints a gloomy scenario, which is already foreseen by the US Federal Reserve (Fed) as the last piece of the puzzle, the labour market, showed signs of slowing down. The GBPUSD trades at 1.2459, down by 0.33%.
The ISM non-manufacturing index rose by 51.2, below estimates and the prior’s month data. Earlier, private hiring in the US, as reported by ADP in collaboration with Stanford Digital Economy Lab, jumped to 145K, below the 200K consensus.
After these readings, the GBP/USD pair seesawed in an extensive 70-pip range, from 1.2505-1.2432, before stabilizing around 1.2450. As business activity slows down, recessionary fears are growing amongst investors.
Markets continued to price in that the US central bank, the Fed would keep rates unchanged at their May meeting. The UK economic docket featured the S&P Global Services PMI, which came at 52.9, below estimates.
UK inflation remains at double-digit figures, though per the latest Bank of England’s Monetary Policy Report, the central bank expected inflation to drop “significantly in Q2 2023.”
Investors have begun to price in a less hawkish BoE, and for the next monetary policy meeting, odds for a no change sit at 54.5%.
Technically, it appears that the pair peaked at about 1.2500, and more decline is anticipated. If GBP/USD drops below Tuesday’s low of 1.2394, the 20-day exponential moving average at 1.2276 and the psychological 1.2200 level would serve as the pair’s next supports.
Pound, Sterling
