GBPUSD Pauses As UK Manufacturing PMI Drops to 8-Year Low

GBPUSD
GBPUSD

The GBPUSD pair declined today partly because of the dollar strength. Investors ran to the US dollar after Donald Trump warned of a dark two weeks as the number of Coronavirus cases are expected to jump. In a grim warning, the US president warned that between 100k and 250k Americans would die from the disease.

Meanwhile, we received weak but positive manufacturing PMI data from the UK. A study by Markit Economics showed that the manufacturing PMI declined to 47.8, which was lower than the previous number of 51.7. A PMI number below 50 is usually a sign of contraction. Still, this was better than the consensus estimates of 47.

In the report, Markit said that manufacturing output and new orders declined at the fastest pace since 2012, when Europe was in a debt crisis. The impact of the decline was far and wide, with many service providers and transport operators suffering.

In the survey, the manufacturers said that their businesses were being affected with the ongoing shutdown. Some said that parts crucial to their operations were being delayed. In the statement, Rob Dobson, from Markit said that:

The latest survey numbers underscore how the global outbreak of COVID-19 is causing huge disruptions to production, demand and supply chains at UK manufacturers.

Meanwhile, as I wrote earlier, the UK economy is at breaking point. Banks have stopped paying bonuses and dividends while retailers have said they won’t pay rent. This is a day after BrightHouse filed for bankruptcy. Other companies are expected to file soon.

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GBPUSD Technical Analysis

The GBP to USD pair dropped to an intraday low of 1.2328, which is slightly below the important channel shown in yellow below. The price has also remained stuck at the 50-day exponential moving average level. Meanwhile, volatility, as measured by the Average True Range (ATR) indicator has been falling. A falling ATR tends to be a calm before the storm, which means the pair could see some significant swings. Perhaps, this will happen after ADP releases payrolls data later today.

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