GBP/USD: Sidelined amid Brexit drama, eyes on UK Services PMI, politics
- GBP/USD seesaws amid mixed Brexit signals.
- The UK PM Johnson is set to ask for another Parliament prorogation to the Queen.
- UK Services PMI, US ISM Non-Manufacturing PMI, Factory Orders will decorate the economic calendar.
In additional to contrasting Brexit signals, markets cautious trading ahead of the key data/events also limits GBP/USD moves as it makes the rounds to 1.2300 ahead of the London open on Thursday.
While talks of support to the UK PM’s Brexit proposal by the Democratic Unionist Party (DUP) and the Labour rebels play positive roles to the Cable’s momentum, the European Union’s (EU) lack of response and Irish criticism of the deal seems to cap the pair’s upside. Also, the EU stands ready to extend the Brexit without the United Kingdom’s (UK) Prime Minister (PM) Boris Johnson’s request.
In the latest Brexit headlines from the Guardian, the EU Chief Brexit negotiator Michel Barnier described the Tory boss’s proposal as trap while the European Commission refused any secret talks with the UK before a crunch summit on October 17.
At home, the Conservative leader is readying for another Parliament suspension from October 08 to 14 in order to pave way for the Queen’s speech. The short prorogation is cited necessary to enable logistical and security preparations for the State Opening of Parliament, as per the BBC.
Elsewhere, the US Dollar (USD) recently came under pressure as sluggish activity numbers renew calls of recession in the world’s largest economy. Adding to the market pessimism could be the latest US-EU trade tussle wherein the Trump administration announced fresh tariffs on $7.5 billion worth of EU goods.
With this, markets will be closely observing today’s economic calendar as it offers the September month Services Purchasing Managers’ Index (PMI) from the UK as well as the US ISM Non-Manufacturing PMI and August month Factory Orders. While UK Services PMI is anticipated to soften to 50.3 from 50.6, its counterpart from the US could weaken to 55.1 from 56.4. Further, the US Factory Orders may slump to -0.2% following a 1.4% growth registered during the previous month.
On the political front, development surrounding the US-EU trade tension and the EU’s response to the UK PM’s Brexit proposal, coupled with the British lawmakers’ response to calls of another Parliament prorogation, will entertain market players.
Technical Analysis
FXStreet Analyst Omkar Godbole spots the pair’s indecision with back-to-back Doji candlestick formation on the daily chart:
“A Doji represents indecision in the market place. In GBP/USD's case, the Doji candles have appeared following a sell-off from recent highs near 1.2580 and at the 50-day MA support and represent seller exhaustion. That said, a bullish Doji reversal would be confirmed if the pair finds acceptance above 1.2339 – the high of Oct. 1's Doji candle. On the downside, a close below the 50-day MA, currently at 1.2249, would imply a continuation of the sell-off from the recent high of 1.2582 and open the doors for 1.21.”