UK Services PMI rises, pound edges up

The British pound is almost unchanged in the Tuesday session. GBP/USD is currently trading at 1.3641, up 0.24% on the day.

UK and US Services PMIs accelerate

The focus is on the services sector today, with the release of September Services PMI reports. In the UK, the PMI improved to 55.4, up from 55.0 beforehand and well into expansionary territory. Business conditions remain favourable as the government has lifted pandemic restrictions. However, problems which have become all-too familiar remain; namely, shortages of workers and raw materials, as well as severe supply chain disruptions. The UK fuel crisis and higher energy prices have also increased costs for services providers. The same problems are being reported by manufacturers, which has hurt growth in the manufacturing sector.

In the US, the services sector continues to show strong expansion. The ISM Services PMI edged higher to 61.9, up from 61.7 in August. This marked a 16th successive month of growth, as the recovery from the Covid downturn continues at a brisk clip.

The US dollar is down for a fourth straight day against the pound, but we could see the dollar rebound, as there are a host of risk factors on the minds of investors. This includes the impasse in Congress over the debt ceiling and infrastructure bills, high inflation and surging oil prices. Investors are looking to minimize risk and that could boost the safe-haven US dollar. The 10-year Treasury yield is back above 1.50%, but we’re unlikely to see stronger gains ahead of the nonfarm payroll report on Friday. If the employment report shows a gain of 500 thousand or more, it would cement a Fed taper in the next month or two and would provide a boost for the US dollar.

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GBP/USD Technical Analysis

• 1.3711 is the next resistance line. 1.3879 is next.
• There is support at 1.3394. Below, there is support at 1.3245

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