GBP/USD – Pound slide continues as Construction PMI slumps

GBP/USD has lost ground in the Tuesday session, continuing the losses seen on Monday. In the North American session, the pair is trading at 1.2829, down 0.30% on the day. On the release front, Construction PMI in August dropped to 52.9, shy of the estimate of 54.9. The reading was down sharply from the July release of 55.8 points. In the U.K, BoE Governor Mark Carney testified about inflation before Parliament’s Treasury Committee. In the U.S, ISM Manufacturing PMI jumped to 61.3, well above the estimate of 57.6 points. On Wednesday, the U.K releases Services PMI.

The pound has dropped for a fourth straight session, as investors reacted negatively to a weak construction PMI. The indicator missed expectations and fell to a 3-month low. Not surprisingly, construction firms remain very concerned about the lack of clarity of Brexit, which has had a negative impact on business confidence. The weak release follows a soft Manufacturing PMI, and the disappointing numbers have pushed the British pound 1% lower this week.

With investors again focused on global trade tensions, the U.S dollar is broadly higher on Tuesday. Foremost in investors’ mind is the simmering trade dispute between the U.S and China. So far, the two economic giants have imposed $50 billion in tariffs on each other, and President Trump has threatened further tariffs worth some $200 billion, which could be imposed as early as this week. The U.S could elect to impose the tariffs in smaller bites, such as a $50 billion tariff. Trade trouble brews elsewhere as well. Talks are continuing between the U.S and Canada, after Friday’s deadline passed with no agreement in place. The EU has also engaged in a tit-for-tat tariff exchange with the United States. The dollar has climbed significantly since trade tensions began in April, as the dollar has benefited from being the primary reserve currency.

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GBP/USD Fundamentals

Tuesday (September 4)

• 4:30 British Construction PMI. Estimate 54.9. Actual 52.9
• 8:15 British Inflation Report Hearings
• 9:45 US Final Manufacturing PMI. Estimate 54.5. Actual 54.7
• 10:00 US ISM Manufacturing PMI. Estimate 57.6. Actual 61.3
• 10:00 US Construction Spending. Estimate 0.5%. Actual 0.1%
• 10:00 US ISM Manufacturing Prices.  Estimate 74.0. Actual 72.1
• Tentative – US IBD/TIPP Economic Optimism. Estimate 57.2. Actual 55.7
• All Day – US Total Vehicle Sales. Estimate 16.7M

Wednesday (September 5)

• 4:30 British Services PMI. Estimate 53.9

*All release times are DST

*Key events are in bold

GBP/USD for Tuesday, September 4, 2018

GBP/USD September 4 at 11:40 DST

Open: 1.2870 High: 1.2876 Low: 1.2811 Close: 1.2830

GBP/USD Technical

GBP/USD edged lower in the Asian and European sessions. The pair has been flat in the North American session.

• 1.2706 is providing support
• 1.2852 has switched to a resistance role after losses by GBP/USD on Tuesday
• Current range: 1.2852 to 1.2996

Further levels in both directions:

• Below: 1.2706, 1.2589 and 1.2366
• Above: 1.2852, 1.2996, 1.3088 and 1.3173

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