The British pound fell against the US dollar yesterday, losing all the gains it had on Friday last week, primarily due to a lack of any major news releases or optimistic news from the country. Therefore, the GBP/USD currency was primarily driven by investor sentiment, which favored the greenback due to the overwhelmingly positive Empire State Manufacturing Index data published by the US Federal Reserve.
From a high of 1.2570, the GBP/USD pair declined to a low of 1.2507 and continues to trade near that level.
The GBP/USD pair was trading sideways during the Asian session yesterday before selling pressure pushed the pair downward in the early European session. The currency pair declined on the market’s expectations that the Bank of England may join other central banks and announce a rate cut in the next policy meeting.
Furthermore, investors were also uncomfortable about Boris Johnson taking the lead in the UK Prime Minister race. The contest is expected to end this week. The latest survey indicates that Johnson is far ahead of other competitors in the race. Many analysts believe that Johnson will not only take the mantle from Theresa May but also sign a trade deal with the US as he shares a warm relationship with the US.
Following an unprecedented contraction reported in the past month’s national manufacturing activities, New York’s Federal Reserve Bank published a study on Monday illustrating a modest rebound in July’s manufacturing activity. The New York Fed said that the overall business environment index rose from -8.6 in June to 4.3 in July, implying an expansion in domestic manufacturing operations.
Economists had anticipated the index to increase to 2.0 for the reported period. The larger than anticipated rebound by overall business conditions index has arrived after the index registered its first negative figure in more than two years in June.
The headline index has rebounded despite the new orders index plunging to a -1.50 in July, compared with -12 in June, implying a continued contraction in new orders but at a slower rate.
The report also reveals that the shipments index declined to 7.2 in July, from 9.7 in June. According to New York Fed, going forward, the indices reflecting the six-month view was slightly better than the previous month, with the future business index rising to 30.8 in July, from 25.7 in the earlier month. Lack of impetus and political uncertainty is expected to keep the pound weak against the greenback.
Technically, the GBP/USD pair is declining after facing resistance at 1.2570. The stochastic oscillator is in the bearish region. Additionally, the currency pair is trading below its 50-day moving average. Therefore, we can expect the GBP/USD pair to move down in the short-term.
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