Pound Drops 0.70% as US PMIs Surge and Dollar Index Breaks 101
Sterling falls to 1.3253 against the dollar after strong US business data and hawkish Fed comments lift the greenback.
Key points
- GBP/USD fell 0.70% to 1.3253 as the US Dollar Index rose above 101.00.
- US Manufacturing PMI hit 57 in September, beating forecasts and prior readings of 53.9.
- Market odds for a Fed rate hike in October increased to 70% from 52%.
The British pound fell 0.70% against the US dollar on Wednesday. This decline pushed the GBP/USD exchange rate down to 1.3253. The drop followed a significant improvement in US economic indicators.
US business activity data exceeded expectations, boosting the value of the greenback. The US Dollar Index rose 0.52% to break above 101.00. This was the first time the index had cleared that barrier since July 30.
US Data and Fed Remarks
S&P Global reported that the Flash Manufacturing PMI reached 57 in September. This figure surpassed the previous month's reading of 53.9 and analyst forecasts of 53.5. The Services PMI also expanded from 56.5 to 58.2, indicating broad-based growth.
Fed Governor Michael Barr stated that additional rate hikes are likely necessary. His comments increased market expectations for tighter monetary policy. The probability of a Fed rate hike in October rose to 70% from 52% the day before.
UK Slower Growth and Policy Gap
UK business activity slowed in September compared to the previous month. S&P Global data showed that manufacturing and services expansion decelerated. This divergence leaves the pound exposed to a widening policy gap with the US.
Technical Levels and Market Outlook
GBP/USD is trading below the 50, 100, and 200-day moving averages. These lines cluster near 1.3476, acting as a significant resistance zone. The Relative Strength Index at 26 suggests the pair is currently oversold.
Immediate resistance for the pound exists near 1.3333 and 1.3360. Traders watch these levels as potential barriers to any recovery. Without breaking through this cluster, the pair remains vulnerable to further declines.
