- The USD remains under pressure due to trade tension with China.
- Services PMIs from the UK and US are in the spotlight.
- UK PM Johnson finances few billions to safeguard against the no-deal Brexit.
Despite parliamentary recess in the UK, the Prime Minister (PM) Boris Johnson and his team keep preparing for a no-deal Brexit, which in turn exerts downside pressure on the GBP/USD pair ahead of the key Services PMI data for July. At the time of writing, the quote drops to 1.2150 heading into the UK open on Monday.
While some among the Conservative party doubt over the PM Johnson’s ability to crash the UK out of the EU without any deal, several others including the British Brexit negotiator and a top ally to Mr. Johnson continue to increase odds that such an outcome isn’t totally out of his to reach.
Elsewhere, policymakers are on the round to announce additional budget as a part of their preparations for the no-deal Brexit. Following a late last-week announcement of £2.1 billion funding by UK Finance Minister Sajid Javid, PM Johnson pledges extra £1.8 billion during early Monday in Asia.
On the other hand, the US Dollar (USD) fails to enjoy upbeat employment data and the Fed’s not-so-dovish rate cut as it bears the burden of the US-China trade tussle that is likely turning towards another stop in the negotiations.
Moving on, July month Purchasing Managers’ Index (PMI) numbers for the UK and the US services activities will be on the traders’ watch-list during the day, not to forget about the trade/political news.
While the UK Services PMI and the US Markit Services PMI are less likely to deviate from their respective priors of 50.2 and 52.2, likely improvement in the US ISM Non-Manufacturing PMI to 50.5 from 50.1 can help the USD to recover some of its recent losses.
Having a falling wedge pattern on the lower end, price is expected to drop further on the downside forming new lower lows and lower highs Testing the lower line before we bounce back up. If you are looking to short then i suggest not to hold for a long time as policy makers and the government won’t allow value of their currency to hit new lows of the month as its bad in terms of economy growth.
On Friday the pound is expecting to shake from the Gross domestic product report released by the National statistic as a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative (or bearish).
Last report read a lower rating and has been on of the factors that Pound is loosing value. However any positive reading will shoot the Gbp North and violating the long downtrend history.
Raymond is a professional currency trader with experience of 4 years trading the financial markets. Certified Risk Manager and Contributor at profxtigers.com