The GBPUSD pair held steady ahead of the release of the flash manufacturing and services PMI data by Markit and the Charted Institute of Purchasing and Supply (CIPS).
GBPUSD Eyes UK Manufacturing PMI
The manufacturing industry employs more than 2.7 million people and contributes about 11% of the total GDP. The industry is also an important source of foreign exchange since it contributes more than 45% of total exports.
The manufacturing sector has been relatively affected by the current coronavirus pandemic. This is because many companies have been forced to halt production. Those operating have to do with limited and often expensive supply chain. Some of the manufacturing companies that have shut down their operations are Ford, Vauxhaul, and Nissan among others.
The effect of the pandemic will be revealed in a report that will be released by Markit. Analysts expect the PMI to drop to a historic low of 33. This will be the lowest it has been since the 2008/9 financial crisis.
Services PMI Set to disappoint
Markit will also release the services PMI data. This number is particularly important for the United Kingdom because it accounts for 80% of the total GDP. It also employs millions of people.
As a result of the pandemic, most companies in the service industry have closed. For example, very little activity is going on at Heathrow Airport because the number of flights has declined. Similarly, most restaurants and hotels have closed because there is very little activity going on.
Analysts expect the flash services PMI to drop from a record low of 34.9 in March to a low of 29.5. This will be the lowest service PMI recorded since the last financial crisis. It also means that jobs of millions of people in the country are at risk.
Brexit talks ongoing
Amid all this, traders are also focusing on Brexit, whose talks are going on. The new round of talks started on Monday and are expected to conclude tomorrow. The challenge for the negotiators is that time is very limited and there is no physical contact between them. We hope to get some feedback about the progress tomorrow.
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GBPUSD technical outlook
On the three-hour chart below, we see that the GBPUSD pair started falling after reaching a high of 1.2644 on Thursday last week. The pair found some support yesterday at the 50% Fibonacci retracement level yesterday. This retracement connected the highest point on March 9 with the lowest part on March 24.
I expect the downward pressure to continue on the cable today if it manages to move below the 50% retracement. If this happens, the pair will likely move lower and attempt to retest the April 7 swing of 1.2168.
The alternate scenario is where the pair moves upwards and retests the 50-day EMA and the psychological level of 1.2400
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