GBP/USD edges lower, PMIs next

The British pound has edged lower on Tuesday. GBP/USD is trading at 1.2913 in the North American session, down 0.15% on the day. It’s a light day on the data calendar which means that the pound will likely continue to have a quiet day.

In the US, Existing Home Sales fell 5.4% in July to 3.89 million, the sharpest monthly decline since 2022 and a fourth monthly decline. The Richmond Manufacturing index declined to -17 in July, down from -10 in June and the lowest level since May 2020. Both readings missed expectations. There are no UK releases on the schedule.

In the UK, the economy is showing signs of improvement. The services sector has posted eight straight months of growth and the streak is expected to continue in July, with a market estimate of 52.5. The manufacturing sector has emerged from a prolonged contraction of almost two years, posting back-to-back months of growth.

The Bank of England meets on August 1 and it’s uncertain whether policymakers will hit the rate-cut button or hold rates at 5.25%. Inflation has fallen to the 2% target but services inflation remains red hot at around 5% and that has complicated plans to lower rates.

The Federal Reserve has hinted at a historic rate cut at the September meeting. The markets are fully on board and have priced in a rate cut at the meeting at around 90%. Last week, Fed Chair Powell said that the Fed could cut rates even if inflation was above the 2% target, if the Fed was confident that inflation would fall back to the 2% level.
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GBP/USD Technical

•  There is resistance at 1.2954 and 1.3006
•  1.2862 and 1.2810 are providing support

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