GBP/USD Remains Under Pressure Despite Robust UK PMI Headlines

[MongiIG]

GBP/USD PRICE, CHART, AND ANALYSIS

• UK PMIs mixed to stronger but fears remain.
• GBP/USD is unchanged as the US dollar remains in the driving seat.

 

A robust set of UK PMI preliminary readings for March with the UK services sector, in particular, showing further improvement. The manufacturing number missed expectations, while the composite number beat forecast but failed to match last month’s number.

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According to Chris Williamson, chief business economist at S&P global, ‘the outlook darkened as concerns over Russia's invasion exacerbated existing worries over soaring prices, supply chains and slowing economic growth. Business expectations are now at their lowest for almost one and a half years, pointing to a marked slowing in the pace of economic growth in coming months’. Mr. Williamson added that ‘prices pressures have spiked higher due to increased energy and commodity prices resulting from the invasion. With March seeing by far the largest rise in selling prices for goods and services ever recorded by the survey, consumer price inflation is set to rise further in the months ahead’.

Full UK PMI Release

The release had little effect on an already weak GBP/USD as the US dollar continues to drive action in the pair. Various Fed members spoke yesterday saying that the next interest rate hike in the US should be 50 basis points and not the standard 25 basis point rise, and called for the Fed to frontload rate hikes to try and quell rampant inflation.

GBP/USD is retesting short-term support around the 1.3160 level and may well look at the recent 1.3000 double-low again.

 

GBP/USD DAILY PRICE CHART – MARCH 24, 2022

Retail trader data show 70.57% of traders are net-long with the ratio of traders long to short at 2.40 to 1. The number of traders net-long is 11.68% higher than yesterday and 1.77% lower from last week, while the number of traders net-short is 14.91% lower than yesterday and 14.68% higher from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

What is your view on GBP/USD – bullish or bearish?

 

Mar 24, 2022 |  DailyFX
Nick Cawley, Strategist