Friday’s trade saw GBP/USD within the range of 1.5123-1.5238. The pair closed at 1.5182, gaining 0.35% on a daily basis. It has been the first increase in the past 11 trading days. The daily high has been the highest level since September 28th, when the cross registered a high of 1.5243. In weekly terms, GBP/USD registered no change, which followed a 2.25% slump in the prior week, or the sharpest one since the week ended on March 8th, when the cross plunged 2.57%.
At 7:34 GMT today GBP/USD was gaining 0.25% for the day to trade at 1.5224. The pair touched a daily high at 1.5229 at 7:20 GMT.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United Kingdom
Services PMI by Markit/CIPS
Activity in United Kingdom’s sector of services probably increased in September, with the corresponding Purchasing Managers Index coming in at 56.0, up from 55.6 in the prior month. If so, this would be the 33rd consecutive month, when the gauge inhabited the area above 50.0. The index is based on a survey, encompassing managers of companies, that operate in sectors such as transportation, communications, IT, financial intermediation, tourism. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values above the key level of 50.0 signify predominant optimism (expansion in general activity). A larger-than-projected improvement in the index would certainly boost the appeal of the pound. The Chartered Institute of Purchasing and Supply (CIPS) is to release the official reading at 8:30 GMT.
United States
Services PMI by Markit – final estimate
The final Services Purchasing Managers Index probably confirmed the preliminary value for September at 55.6, reported on September 25th. If so, this would be the lowest index reading since June, when the PMI was reported at a final 54.8. In August the final seasonally adjusted index stood at 56.1. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). In case, however, a larger-than-projected slowdown in services sector activity was reported, this would have a moderate bearish effect on the US dollar. The final data by Markit Economics is due out at 13:45 GMT.
ISM Non-Manufacturing PMI
Activity in United States’ sector of services probably slowed down for a second straight month in September, with the corresponding non-manufacturing PMI coming in at a reading of 58.1, according to the median forecast by experts, down from 59.0 in August. If expectations were met, September would be the 69th consecutive month, when the gauge stood in the area above 50.0, but however, it would be the lowest index reading since June, when a value of 56.0 was reported. The PMI is a compound index, based on the values of four equally-weighted components, which comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.
The New Orders Index stood at 63.4 in August, down from a reading of 63.8 in the prior month. The Employment Index slipped to 56.0 in August from 59.6 in July, while marking growth for the 18th month in a row, according to data by the Institute for Supply Management (ISM). The Prices Index slid to 50.8 in August from 53.7 in July, which indicated prices rose for a sixth straight month. The Non-Manufacturing Business Activity Index fell to 63.9 in August from 64.9 in July, indicating growth for a 73rd straight month.
Among the 17 services industries, 15 reported growth in August, 1 reported contraction and 1 reported no change in conditions.
In case the PMI slowed down at a larger rate than anticipated, this would lead to a heavy sell-off of the US dollar. The Institute for Supply Management (ISM) is to release the official PMI value at 14:00 GMT.
Correlation with other Majors
Taking into account the week ended on October 4th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:
GBP/USD to EUR/USD (0.5949, or strong)
GBP/USD to USD/JPY (0.1256, or weak)
GBP/USD to NZD/USD (0.0142, or very weak)
GBP/USD to AUD/USD (0.0141, or very weak)
GBP/USD to USD/CAD (-0.1974, or weak)
GBP/USD to USD/CHF (-0.5878, or strong)
1. During the examined period GBP/USD moved strongly in one and the same direction with EUR/USD, while moving strongly in the opposite direction compared to USD/CHF.
2. GBP/USD moved almost independently compared to NZD/USD and AUD/USD during the past week.
3. The correlation between GBP/USD and USD/JPY, GBP/USD and USD/CAD was insignificant during the period in question.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.625% on October 2nd, or the highest level since September 30th (0.625%), after which it slid to 0.549% at the close to lose 2.1 basis points (0.021 percentage point) compared to October 1st. It has been the fourth drop in the past five trading days.
The yield on US 2-year government bonds climbed as high as 0.680% on October 2nd, or the highest level since September 29th (0.684%), after which it fell to 0.581% at the close to lose 6.8 basis points (0.068 percentage point) for the day. It has been the fourth drop in the past five trading days.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, shrank to 0.032% on October 2nd from 0.079% on October 1st. The October 2nd yield spread has been the lowest one since September 3rd, when the difference was 0.032%.
Meanwhile, the yield on UK 10-year government bonds soared as high as 1.795% on October 2nd, or the highest level since September 30th (1.809%), after which it slid to 1.702% at the close to lose 4.6 basis points (0.046 percentage point) compared to October 1st, while marking a second consecutive trading day of decline.
The yield on US 10-year government bonds climbed as high as 2.065% on October 2nd, after which it slipped to 1.991% at the close to lose 5.1 basis points (0.051 percentage point) compared to October 1st. It has been the fourth drop in the past five trading days.
The spread between 10-year US and 10-year UK bond yields shrank to 0.289% on October 2nd from 0.294% on October 1st. The October 2nd yield difference has been the lowest one since September 30th, when the spread was 0.270%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.5193
R2 – 1.5203
R3 (range resistance) – 1.5214
R4 (range breakout) – 1.5245
S1 – 1.5171
S2 – 1.5161
S3 (range support) – 1.5150
S4 (range breakout) – 1.5119
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.5176
R1 – 1.5247
R2 – 1.5312
R3 – 1.5383
S1 – 1.5111
S2 – 1.5040
S3 – 1.4975
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
