The GBP/USD pair was closed at 1.27253 after placing a high of 1.27769 and a low of 1.26749. Overall the movement of the GBP/USD pair remained flat throughout the day. The GBP/USD pair remained flat due to mixed movements throughout the trading session. The pair closed its day at the same level it started its day with. In the first trading session, the pair continued to decline due to the strong US dollar and the UK’s coronavirus situation. However, the renewed Brexit hopes from Michel Barnier gave strength to the British Pound that recovered all of its daily losses and ended the GBP/USD pair’s day with a flat movement.
On the data front, at 13:30 GMT, the Flash Manufacturing PMI from Great Britain remained flat with the expectations of 54.3 in September. In September from the UK, the Flash Services PMI dropped to 55.1 from the projected 57.0 and previous 58.8 and weighed on British Pound.
The weak data from the UK exerted pressure on local currency. As the data suggested that manufacturing activity expanded while the services sector showed a drop in services activity in the UK. It was due to the announcement made by the Tory government to impose restrictions on bars, pubs, restaurants, and movie theaters to reduce the spread of coronavirus. PM Boris Johnson also issued a law not to have a gathering of more than six people; otherwise, it would be considered illegal. These restrictions impacted Britain’s economy and ultimately weighed on the Sterling and added pressure on GBP/USD prices.
Furthermore, the GBP/USD pair’s downside momentum could also be attributed to the strong rebound of the US dollar. The DXY- US Dollar Index rose above 94 Wednesday because of its safe-haven status and positive macroeconomic data.
The amount of uncertainty has recently increased over the effect of coronavirus cases globally and the increased tensions between the world’s two biggest economies. These uncertainties raised the safe-haven appeal that ultimately provided strength to the greenback and weighed on the GBP/USD pair.
Meanwhile, the greenback was also supported by the upbeat economic data on Wednesday with HPI in July at 1.0% against the forecast of 0.4% and Flash Manufacturing PMI at 53.5 against the forecasted 52.5. The US’s positive macroeconomic data raised the US dollar and exerted downside pressure on the GBP/USD pair that drove its prices to the lowest till 27th July.
However, the prices did not remain depressed and started to recover in Brexit’s hopes in the late trading session. On Wednesday, a top EU chief negotiator, Michel Barnier, said that the bloc was determined to get a Brexit trade deal with the UK. However, he also said that as the PM Boris Johnson has decided to break the withdrawal agreement, so the negotiations will be firm and realistic from the EU side.
This statement raised hopes that a Brexit deal was still on the table, and there were still chances that Britain would leave the European Union with a deal. These rising hopes and risk sentiment also raised the GBP/USD pair in the late trading session, and the pair produced a flat candle at the end of the day amid mixed market sentiment.
Daily Technical losses
Pivot point: 1.2725
On the technical side, the GBP/USD pair has bounced off above the support level of 1.2685 level, having tested the resistance level of 1.2790 level. The pair is trading within a downward channel which is also suggesting selling bias around 1.2780 level. However, our forex trading signal in GBP/USD was a bit risky; therefore, we decided to close the trade and hold the one in EUR/USD pair. Let’s wait for the next trade from our side now. Good luck!