The British pound is almost unchanged for a third straight day. Currently, GDP/USD is trading at 1.3964, up 0.07% on the day.
Pound stabilizes below 1.40
The British pound is in tranquil waters this week, after the currency slid 1.5% late last week. The catalyst for the steep drop was the sharp jump in US Treasury bonds, which boosted the US dollar. However, with US Treasuries retreating, the dollar’s rally has run out of steam, and GBP/USD has been trading slightly below the 1.40 level for most of the week.
The UK services sector has been hard-hit by the Covid-19 pandemic, and health restrictions and the national lockdown have resulted in contraction in Services PMI for the past four months. Still, the PMI showed strong improvement in February, rising from 39.5 to 49.5 index points. This shows a degree of stability has returned to the services sector, which is just a tad below the 50-level, which separates contraction from expansion. The lockdown has resulted in pent-up consumer demand, and with the government slowly opening up the UK economy, we can expect the services sector to rise into expansion territory later in the year.
Over in the US, the ADP Employment report was surprisingly weak, with a weak gain of 117 thousand. This was much lower than the previous release of 174 thousand and nowhere near the forecast of 203 thousand. The big question for investors is whether the weak ADP reading will be followed on Friday, when the official nonfarm payrolls report is released. The forecast stands at 185 thousand, and a significantly lower release could weigh on the US dollar.
GBP/USD Technical
- There is resistance just above the 1.40 level, at 1.4005. The next resistance line is at 1.4050
- The first level of support is at 1.3954. Below, we find support at 1.3814. This is followed by the rising wedge at 1.3785
