GBP/USD hits ten-week high due to positive UK PMIs
- GBP/USD sustains rise above 1.2500, in a market quieted by US Thanksgiving holiday.
- UK's economic recovery signals boost GBP, with Services and Composite PMIs expanding and Manufacturing PMI outperforming expectations.
- The UK's long-term economic outlook remains cautious, with potential BoE rate hikes looming.
The Pound Sterling (GBP) gets some relief and advances against the US Dollar (USD) in thin trading due to US markets being closed during Thanksgiving. Nevertheless, the GBP/USD has risen to a ten-week high and trades above the 1.2500 figure for the fourth consecutive day.
Pound Sterling gains against the Dollar, supported by improved business activity and inflation drop in the UK
GBP/USD’s advance is courtesy of positive economic data in the UK. Business activity in the UK recovered some ground, as S&P Global revealed that Services and the Composite PMIs expanded after staying at contractionary territory after three months of contraction. Although the Manufacturing PMI remained below the 50 thresholds of contraction/expansion, it grew from 44.8 to 46.7, exceeding forecasts of 45.
According to S&P Economic Director Tim Moore, the drop in headline inflation was the main driver of supporting business activity. The latest UK inflation report witnessed the CPI plunging from 6.7% to 4.6%, while the economy dodged a recession, with GDP standing at 0%.
Nevertheless, the economic outlook for the UK remains weak, as data projects a recession. Recent hawkish comments by the Bank of England (BoE) Governor Andrew Bailey emphasized that rates must be higher for longer, which could weigh on the economy.
GBP/USD Price Analysis: Technical outlook
The GBP/USD daily chart portrays the pair as remaining in an uptrend during the week, though after hitting a new weekly high of 1.2569, it gave back some gains and retraced below the 1.2550 mark. For a bullish continuation, buyers need to lift the exchange rates above the November 22 daily open at 1.2537 so they can remain hopeful of testing the 1.2600 mark. Failure to do it, the GBP/USD could dive to 1.2500, which, once surrendered, would expose the 200-day moving average (DMA) at 1.2451.