British Pound (GBP/USD) Nudges Higher, UK PMIs Beat Original Forecasts

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British Pound (GBP) Price Outlook

  • Sterling slightly better bid, cable around 1.3850.
  • UK PMIs beat original forecasts.

GBP/USD continues to pare back recent losses, helped today by slightly better than expected UK PMI data. The final prints beat expectations and came up just shy of last month’s blockbuster figures. According to data provider IHS Markit. ‘UK service providers reported another steep increase in business activity during June, with the speed of recovery only marginally slower than the peak seen in May. The rapid turnaround in business and consumer spending since the roll-back of pandemic restrictions led to the fastest rate of job creation for seven years’. While business activity remains strong, it was noted in the press release that price rises from service providers ‘ was the fastest since July 1996 and the cost of living is set to rise in the coming months’.

With the US on holiday today, Sterling is being driven by domestic demand and is currently showing small gains across the board. Cable’s recent sell-off was driven by US dollar strength, and while the greenback may continue to move higher over the coming weeks, Sterling may have found a short-term bottom against the US dollar. The pair need to regain the medium-term uptrend, currently at just under 1.4000 and stay above trend if the June 1 high at just under 1.4250 is to be tested.

GBP/USD Daily Price Chart (April 2020 – July 5, 2021)

British Pound (GBP/USD) Nudges Higher, UK PMIs Beat Original Forecasts

Retail trader data show 62.79% of traders are net-long with the ratio of traders long to short at 1.69 to 1. The number of traders net-long is 2.68% higher than yesterday and 10.32% higher from last week, while the number of traders net-short is 4.31% higher than yesterday and 13.98% lower 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 less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

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What is your view on Sterling– bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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