GBPUSD has lost its upside momentum in the early European session on Tuesday, trading at 1.2671, after shaving 0.13% off the day’s opening. Unlike Monday, when there wasn’t much happening around the pair’s fundamentals, the market has adopted a risk-off approach on Tuesday ahead of high-impact macroeconomic releases.
The cable reached a weekly high of 1.2706 on Monday, closing trading at a daily gain of 0.26%. That was mostly driven by weak dollar fundamentals, underpinned by lower-than-expected ISM Manufacturing PMI reading on Friday. In the absence of impactful releases from the UK and the US, that momentum was carried over to Monday, helped by falling yields on US Treasuries.
On Tuesday, however, the GBP faces the dollar pound-for-pound as both the UK and US PMI figures come out. The February reading for S&P Global/CIPS Composite PMI came at 53.0, marginally below the consensus forecast 53.3. Similarly, the S&P Global/CIPS Services PMI reading missed the forecast, coming at 53.8, against a projected 54.3. These misses will exert downward pressure on the pound, ahead of the US ISM Non-Manufacturing Prices PMI, ISM Non-Manufacturing PMI the S&P Global Services PMI which will come out later in the day.
Meanwhile, two non-quantitative factors are bubbling under the GBPUSD currency pair. First, the pound faces potential downward pressure from perceived dovish hints from Chancellor Jeremy Hunt’s statements ahead of the UK Spring Budget presentation on Wednesday. Hunt has hinted of a possibility of tax cuts in the 2024 budget. This has been interpreted as a counter-measure against high interest rates, and could weigh down on the pound.
Secondly, the GBPUSD pair’s trajectory is likely to be impacted by sentiment around Fed Chairman Jerome Powell’s testimony in Congress during the presentation of the Semiannual Monetary Policy Report on Wednesday. The session is expected to provide congressmen with the opportunity to probe Powell on the Monetary Policy. This could tilt the scales in favour of the dollar.
Technical analysis
GBPUSD pivots at 1.2665, and the current momentum favours upside action. The buyers will target the 1.2705 resistance level, and a successful break past it will put 1.2720 within reach. However, a move below the pivot could put the sellers in charge. That will build momentum to try breaching 1.2650 support, which will invalidate the upside narrative. Furthermore, it will see the support move to 1.2630.
