- Refreshed trade war woes and a slackening economic picture is driving the Sterling lower.
- It’s a US session game as the GBP/USD heads into NFP Friday with a clear calendar.
The GBP/USD is shuffling around the 1.4000 level heading into the European session after taking a dive from the week’s levels as risk aversion and disappointing figures from the UK took the Sterling lower.
The Sterling has been struggling lately after falling from the 1.4240 area last week, and the decline has resumed after sluggishly lifting through this week, almost reaching 1.4100 before falling to a fresh low at 1.3965 in Thursday’s action as the US Dollar gained across the board.
The broader markets recovered somewhat this week from the constant barrage of tit-for-tat tariff threats between the US and China, but the recovery may prove to be short-lived as traders await China’s response to Trump’s announcement that he is seeking additional tariffs on a further $100B worth of Chinese-made goods.
UK Services declines sapping strength from the GBP
Adding to the Sterling’s woes is a softening on the macro front: the UK’s Markit services index fell to 51.7 in March, the lowest printing for the figure in over eighteen months. Inclement weather was largely attributed to the decline, and the Bank of England (BoE) is still on pace to deliver a rate hike in May, but a swooning economic landscape may cause a delay in further hikes from the BoE down the road.
Once more into the breach: NFP Friday
Friday is an empty affair for the GBP on the economic calendar, and traders’ focus will be squarely on the US Non-Farm Payrolls report. Markets are looking to nail down the US Fed to a higher number of rate hikes this year, but slack in wage growth figures buried within the NFP report may cause the Fed to loosen up a bit on their tightening schedule. The NFP drops at 12:30 GMT, followed by a speech by Fed head Jerome Powell at 17:30.
GBP/USD Levels to watch
The Sterling is beginning to look increasingly bearish in the short- to medium-term as successive bull runs higher fail to make new ground above the year’s high above 1.4275, “in the 4 hour chart, technical readings suggest that the pair could extend its decline, as the pair is well below its 20 SMA, and struggling around the 200 EMA, this last a major dynamic resistance now, and if the pair remains unable to recover ground beyond it, a downside extension will be further confirmed. Technical indicators in the mentioned chart have bounced modestly within negative territory, but the RSI remains near 38, suggesting that buying interest is limited at the time being.”
Support levels: 1.3965 1.3930 1.3900
Resistance levels: 1.4040 1.4090 1.4125