GBPUSD had a nice bullish run in yesterday’s trading. The currency pair opened at 1.2929 and steadily traded higher to 1.3010. This was the highest level that we have seen it trade since October 21. By the end of yesterday’s New York session, GBPUSD had scored a 61-pip gain at 1.2990.
UK Elections Poll Dictate Pound Direction
As reported yesterday, the pound found enough bids in the market yesterday to rally to the 1.3000 psychological handle on election poll results. The Conservatives are ahead at 44% over Labour which is at 32%, according to Kantar.
The upcoming UK general elections is the biggest event risk for the pound. This is why election poll results are dominating headlines. In fact, the pound’s price action in yesterday’s trading hints that the result of the December 12 elections is more important than the ongoing trade negotiations between the US and China. Equities markets and a few high-risk currencies fell victim to risk aversion yesterday. Market sentiment soured following US President Donald Trump’s remarks that he is in no hurry to strike a phase one deal with China. If this is true and negotiations take longer, the US may in fact implement higher tariffs on Chinese goods on December 15.
Economic Data Scheduled Today
For today, only the final reading of the UK’s services PMI for November is due. Scheduled to be released at 9:30 am GMT, the report is expected to show no revisions to its previous reading at 48.6. This figure which is below the 50.0 baseline reading means that executives in the services industry feel that business conditions are contracting.
On the other hand, we have a couple of high-impact reports due from the US today.
At 1:15 am GMT, the ADP Non-Farm Employment Change report is anticipated to show an increase in jobs of 137k. This report aims to predict the official Non-Farm Payrolls report which is scheduled on Friday. A better-than-expected figure is often bullish for the dollar because it hints that the NFP will also reflect strong labor market numbers. The NFP is one of the key reports tracked by the Fed to make monetary policy decisions.
Then at 3:00 pm GMT, the ISM non-manufacturing PMI report for November is expected to come in at 54.5. A better-than-expected reading will mean that the services sector continued to grow last month, albeit at a slower pace than October’s 54.7 figure.
GBPUSD looks like it broke out higher from its bullish flag on the weekly chart. However, the currency pair needs to be able to sustain gains above the 1.3000 psychological handle. If it does, the next resistance level is at 1.3378 where it established highs in March 2019.
On the other hand, a close below last week’s lows around 1.2819 could mean that sellers may push GBPUSD back down to support at the previous trend line around 1.2575.