Slightly disappointing US data today but still the US dollar bulls keep in control. The pound found no way of testing higher against the US dollar flows even though the BoE Governor was optimistic that the bank can take actions that are required to maintain price stability over time.
This morning the Bank of England governor Andrew Bailey delivered a speech to the Lord Mayor in his Mansion House speech, saying that the United Kingdom's gross domestic product (GDP) is expected to grow by 7.25% by the end of 2021.
“We don't expect the economy to suffer long-term damage. We do expect the cost of living to go up in the coming months, but that should only be short-lived.”
“The good news is that the economy is only around 5% smaller than it was eighteen months ago – and in view of what we have experienced, that is good news – and the gap is closing quite rapidly. But let’s pause for a moment on the good news that the economy is only 5% smaller. In any conventional time, even in the depths of a recession, that would scarcely qualify as good news.”
The ActivTrades sentiment indicator shows retail traders are still bullish on this pair as the price action continues to fall.
GBPUSD is looking likely to pause ahead of tomorrow’s US NFP and wage growth data points around the daily 200 exponential moving average, having found support at the London close at the rising trend line. If by some twist of fate, the US data tomorrow is bearish for the US dollar, the current divergence seen on the daily stochastic versus the lower lows in price action will have formed an early signal of potential support. This is the only bullish thing I can think of at present for the pound against the US dollar as the UK battles with rising covid cases. The more likely scenario is that the price action falls below the 200 ema and then we wait for a retest and continuation lower.
The UK FTSE 100 traded 0.83% higher and was the largest mover of the major indices into the regular trading hours close.
The important US ISM Manufacturing data came in under market expectations and is showing that March was the peak for this data and bond yields.
The Institute For Supply Management report stated “Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices, and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.”
The positive data reading is the 13th consecutive reading indicating expansion in the overall economy after the contraction in April 2020.
The US dollar index is now testing towards the March swing high and is above the $92.50 level at the London close. The biggest US dollar move came against the pound closely followed by the Australian dollar. The analysis from this morning is so far playing out as expected.
We’re still waiting on the OPEC+ meeting to commence but Oil is trading 2.44% higher.