Series of Manufacturing & Services PMI in Focus!
The GBP/USD was closed at $1.3947 after placing a high of $1.3965 and a low of $1.3860. GBP/USD extended its gains on Tuesday and reached near the $1.40 level after the U.S. dollar came under pressure amid Powell's testimony and the strengthened GBP. The U.S. Dollar Index (DXY) extended its decline on Tuesday and reached the 91.64 level. It was further supported by the declining U.S. Treasury yields on benchmark 10-year note that also remained depressed throughout the day and went below 1.50%.
In his testimony before the House of Representatives Select Subcommittee, Fed Chair Jerome Powell said that Fed would not increase interest rates pre-emptively because of the fear of the possible onset of inflation. Instead, it would wait for evidence of actual inflation or other imbalances. Meanwhile, the New York Fed President, John Williams, said that Fed would closely monitor economic data to determine the appropriate point to begin adjusting monetary policy, which was quite far away in his point of view. The greenback came under pressure as the hopes for rising interest rates along with the tapering of asset purchases in the market faded away and added pressure on the prices of the U.S. dollar that was high last week. The declining price of the U.S. dollar pushed further the rising prices of the GBP/USD pair.
On the data front, at 11:00 GMT, the Public Sector Net Borrowing dropped to 23.6B against the forecasted 24.5B and supported the British Pound that added further gains in GBP/USD. At 15:00 GMT, the CBI Industrial Order Expectations also raised to 19 against the forecasted 16 and supported the British Pound that added further upside momentum in GBP/USD. From the U.S. side, at 18:59 GMT, the Richmond Manufacturing Index surged to 22 against the estimated 18 and supported the U.S. dollar that capped further gains in GBP/USD. Finally, at 19:00 GMT, the Existing Home Sales rose to 5.80M against the anticipated 5.71M and supported the U.S. dollar, limiting the upward momentum in the GBP/USD pair.
Moreover, the E.U. citizens living in the U.K. have been given a 28-day warning to apply to remain in the U.K. from the immigration enforcement officials. There is still a week to go until the application deadline; however, the Home Office will allow people to complete an application for settled status if they have a reasonable excuse for delay.
About 5.6 Million European Economic Area citizens and their dependents have applied for settled status with additional 400,000 cases outstanding while the government's helpline received thousands of calls a day. Poland and Romania are the countries whose nationals have made the highest number of applications. The settled status allows the citizens of the E.U. and EEA living in the U.K. to retain the same rights of residence, travel, employment, and access to healthcare and benefits.
Furthermore, the gains in British Pound were supported by the latest announcement from the U.K. government. Boris Johnson's government was prepared to allow fully vaccinated citizens of the U.K. to travel to more than 150 countries without the requirement to quarantine on their return to England later this summer. The new policy is expected to be signed off by the authorities in the coming days and will pave the way for the reopening of international travel. These positive developments kept the risk sentiment in the market supported and pushed risk-sensitive GBP/USD higher on Tuesday.
GBP/USD Intraday Technical Levels
Pivot Point: 1.3924
GBP/USD - Technical Outlook
The GBP/USD is trading at the 1.3978 level, and it has violated the double top resistance level of 1.3960. Closing of candles above 1.3960 level is supporting a strong buying trend in Sterling today. On the higher side, the resistance stays at 1.4008, and a bullish crossover of this level can expose the Cable towards the 1.4053 resistance level. On the downside, the GBP/USD pair's support level holds around 1.3922 and 1.3875 today. Let's keep an eye on the series of fundamentals coming out from the U.K. ecnomy and the U.S. economy. Today, the focus will stay on the Manufacturing and Sercvies PMI figures as these can drive solid price action during the European and the U.S. session. All the best!
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