- The US dollar strengthens after the ISM manufacturing PMI, ahead of the NFPs.
- GBP/USD falls for the fifth day in a row.
- Multi-decade low awaits at 1.1409 (March 2020).
A stronger dollar pushed the GBP/USD below 1.1500 levels for the first time since March 2020. USD rises strongly on encouraging US economic data amid risk aversion and rising yields. The pair bottomed out at 1.1497 and then bounced back towards 1.1550, paring losses.
The dollar index is at the highest level since 2002, up 1% on the day. The dollar was trading in positive territory and continued to rise after the US ISM manufacturing report for August, which produced better-than-expected figures, including a recovery in the employment index and a slowdown in prices. Earlier, the weekly jobless claims report also beat expectations. Attention now turns to the Non-Farm Payrolls report to be released on Friday.
Economic data weighed on demand for Treasuries, sending US yields higher. US 10-year Treasury yields stand at 3.28%, a level last seen in June.
The latest leg down in GBP/USD was fueled by the dollar rally overall. The cable falls for the fifth day in a row this Thursday and is headed for the lowest weekly close since 1985.
Despite showing some signs of stabilization, such as the decline in EUR/GBP, the pound remains one of the weakest currencies in the G10, affected by the deteriorating outlook for the British economy. Market participants are also showing concern about the next prime minister. Liz Truss holds the lead in the polls over Rishi Sunak. The Tory winner will be announced on Monday and will succeed Prime Minister Boris Johnson.
Despite the turmoil, expectations remain of a 75 basis point rate hike by the Bank of England in September to curb inflation which, according to a Goldman Sachs report, could reach 22% next year.
Technical levels
Source: Fx Street
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