Yesterday’s trade saw GBP/USD within the range of 1.4991-1.5071. The pair closed at 1.5057, rising 0.13% on a daily basis. It has been the first gain in the past three trading days. The daily low has been the lowest level since April 23rd, when a low of 1.4957 was registered.
At 8:30 GMT today GBP/USD was gaining 0.29% for the day to trade at 1.5100. The pair touched a daily high at 1.5110 at 7:49 GMT, overshooting the upper range breakout level (R4).
Today GBP/USD trading may be influenced by a number of macroeconomic reports and other events as listed below.
Fundamentals
United Kingdom
Manufacturing PMI by Markit/CIPS
Activity in United Kingdom’s sector of manufacturing probably slowed down in November, with the corresponding Purchasing Managers Index coming in at a reading of 54.0, according to the median forecast by experts, down from 55.5 in October. The latter has been the highest PMI level since June 2014, when the gauge was reported at 57.5. If expectations were met, November would be the 31st consecutive month, when the PMI stood above the key level of 50.0.
The index is based on a survey, encompassing managers of companies, that operate in sectors such as manufacturing, mining, utilities. They are asked about their estimate in regard to current business conditions in the sector in terms of new orders, output, employment, demand in the future. Values above 50.0 signify that respondents are rather optimists about business conditions than pessimists.
In case the PMI slowed down more than projected in November, this would have a strong bearish effect on the sterling. The Chartered Institute of Purchasing and Supply (CIPS) is expected to release the official PMI reading at 9:30 GMT.
United States
Manufacturing PMI by Markit – final reading
The final estimate of the Manufacturing Purchasing Managers Index for November probably confirmed the flash estimate of 52.6, which was reported on November 23rd. If expectations were met, this would be the lowest PMI reading since October 2013, when the final gauge was reported at 51.8. In October the final seasonally adjusted PMI stood at 54.1, inching up from a preliminary value of 54.0.
According to preliminary data by Markit, ”…manufacturing production growth moderated since the previous month and was slightly weaker than its average for 2015 so far. At the same time, latest data highlighted the softest expansion of incoming new work for just over two years. Reports from survey respondents generally cited acyclical slowdown in demand patterns and ongoing weakness in export sales. Reflecting this, the index measuring new orders from abroad dipped back inside negative territory in November. Lower levels of new work from abroad were linked to a combination of the strong dollar and weaker global economic conditions.”
”Manufacturing payroll numbers were reported to have increased again in November, continuing the trend seen for much of the past six years. However, the latest expansion of employment levels was only modest and weaker than seen on average over the recovery period. Softer rates of job hiring reflected greater caution in terms of the business outlook and reduced pressure on operating capacity. This was highlighted by a drop in backlogs of work for the first time in 12 months”, Markit stated.
Values above the key level of 50.0 indicate optimism (expanding activity). In case the final PMI for November confirmed or came below the preliminary reading, this would cause a moderate bearish impact on the US dollar. The final reading is due out at 14:45 GMT.
Manufacturing PMI by the ISM
Activity in United States’ manufacturing sector probably improved in November, with the corresponding manufacturing PMI coming in at a reading of 50.3, according to expectations, up from 50.1 in October. The latter has been the lowest PMI reading since May 2013, when the gauge was reported in the area of contraction (49.0).
The New Orders Index came in at 52.9 in October from 50.1 in September. The sub-gauge of production was reported at 52.9, advancing from 51.8 in September. The index of employment slid to a value of 47.6 in October from 50.5 in the preceding month. The gauge of prices was at 39.0 in October, up from 38.0 in September, which suggested lower prices of raw materials for a 12th month in a row. In October, 7 manufacturing industries reported growth, 9 reported contraction and 2 registered no change in conditions, according to the report by the Institute for Supply Management (ISM).
In case the Manufacturing PMI improved more than anticipated in November, this would have a moderate-to-strong bullish effect on the greenback. The Institute for Supply Management (ISM) is to release the official PMI reading at 15:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.625% on November 30th, after which it closed at 0.613% to add 1.7 basis points (0.017 percentage point) compared to November 27th. It has been the first gain in the past three trading days.
The yield on US 2-year government bonds climbed as high as 0.954% on November 30th, or the highest level since November 6th (0.958%), after which it closed at 0.938% to add 1.2 basis points (0.012 percentage point) compared to November 27th. It has been the tenth gain in the past eleven 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 0.325% on November 30th from 0.330% on November 27th. The November 30th yield spread has been the lowest one since November 25th, when the difference was 0.298%.
Meanwhile, the yield on UK 10-year government bonds soared as high as 1.845% on November 30th, or the highest level since November 26th (1.879%), after which it slid to 1.831% at the close to add 1.5 basis points (0.015 percentage point) compared to November 27th. It has been the first gain in the past three trading days.
The yield on US 10-year government bonds climbed as high as 2.245% on November 30th, or the highest level since November 25th (2.248%), after which it slipped to 2.215% at the close to lose 0.007 percentage point compared to November 27th. It has been the sixth consecutive trading day of decrease.
The spread between 10-year US and 10-year UK bond yields narrowed to 0.384% on November 30th from 0.407% on November 27th. The November 30th yield difference has been the lowest one since November 25th, when the spread was 0.340%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.5064
R2 – 1.5072
R3 (range resistance) – 1.5080
R4 (range breakout) – 1.5101
S1 – 1.5050
S2 – 1.5041
S3 (range support) – 1.5035
S4 (range breakout) – 1.5013
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.5087
R1 – 1.5147
R2 – 1.5256
R3 – 1.5316
S1 – 1.4978
S2 – 1.4918
S3 – 1.4809
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