- GBP/USD has dipped back below 1.2500 on Tuesday following weak UK PMI data and amid inflows of risk aversion.
- The pair is targeting a test of its 21 DMA around 1.2425.
British pound bears regained control on Tuesday and pushed the GBP/USD back below the 1.2500 level, a roughly 100 pip reversal from the previous session’s highs, just below the 1.2600 level, after UK PMI data released earlier in the day revived fears about a possible recession later this year. The preliminary estimate of the services PMI for May fell to 51.8, well below the expected drop to 56.9 from 58.9 in April. A reading below 50 suggests negative growth.
The latest data has been interpreted as a brake on the prospects of further monetary tightening by the Bank of England, which had already expressed concern about growth in the United Kingdom, which is going through its worst cost-of-living crisis in decades. The PMI data comes after UK consumer price inflation last week showed headline price pressures rising at a pace of 9.0% year-on-year in April, the highest in four decades. , and employment data showed that the UK labor market remains tight at the start of the second quarter and the end of the first.
In the wake of Monday’s economic docket results, which alluded to a weaker macro environment, coupled with last week’s big US retailers, which all pointed to essentially the same thing, risk appetite has decreased by a little on Tuesday, which has also weighed on GBP/USD. GBP/USD bears are looking to retest the 21-day moving average, which is currently sitting near 1.2425.
Technical levels
Source: Fx Street
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