24.08.202215:28 Forex Analysis & Reviews: GBP/USD: Downward trend prevails

After yesterday's decline against the backdrop of weak macro data received at the beginning of the US trading session from the US, the dollar again moved to growth since the opening of today's trading day.

As of this writing, DXY futures were trading near 108.60, up 60 pips from yesterday's low.

The reason for the dollar's decline was yesterday's US statistics, according to which preliminary PMI indices for the manufacturing and services sector in the US (from S&P Global), as well as data on new home sales in the US, turned out to be disappointing, heightening fears about a recession.

The US S&P Global Composite PMI for August came in at 45, below forecasts of 47, also showing US business activity contracting for the second month in a row. Services PMI fell to 44.1, below the forecast of 49.2 and the previous reading of 47.3. The PMI for the manufacturing sector, although remained above 50, fell to 51.3 from 52.2 in July. "The August PMI data signaled further worrying signs for the health of the US private sector. Demand conditions deteriorated again, driven by the impact of higher interest rates and strong inflationary pressures on consumer spending, which weighed on activity," S&P Global Market Intelligence said.

Nevertheless, many economists believe that yesterday's correction of the dollar after the PMI index is complete. In their opinion, expectations of Fed Chairman Jerome Powell's hawkish statements at the Jackson Hole forum should support demand for the dollar. This may provoke further growth in the dollar index (DXY), which by the end of this week may exceed 110.00. As we wrote in our previous review, "after the breakdown of the local multi-month high 109.14, reached in mid-July, 110.00 will be the next upside target for DXY."

Yesterday, DXY already tested the level of 109.14, reaching a new local high since October 2002 at 109.20 at the beginning of the European trading session.

Yesterday, similar PMIs were presented by S&P Global Market Intelligence for Germany, the Eurozone, and the UK. Figures for Germany and the Eurozone turned out to be better than forecasts, while figures for the UK were weaker than the forecast and previous values. Although the provisional S&P Global Services PMI for August came in better than expected at 52.5 and above 50, separating growth from slowdown, it was still below the previous reading of 52.6, signaling a slowdown in the British economy. At the same time, the index of business activity in the manufacturing sector of the UK (from S&P Global) PMI fell to the level of reduction of 46.0.

Today at 12:30 (GMT), there will be a new driver in the dynamics of the dollar. At this time, the US Census Bureau will release data on orders for durable goods and capital goods. Their growth is expected in July, by +0.6% and +0.3%, respectively.

If data turns out to be significantly weaker than the forecast, then the dollar will again be under pressure, and the GBP/USD pair will receive a new impetus to continue the upward correction. But so far, we can only talk about correction. In general, the downward dynamics of the GBP/USD remains.

Despite yesterday's upward correction, GBP/USD may soon break through yesterday's local low since April 2020 at 1.1717. A downward trend prevails in the dynamics of the pair.