GBP/USD eases lower despite consumer spending rising
- Consumer spending rose in August
- GBPUSD eases after strong gains in August
- GBP/USD tests 1.3140 support
GBP/USD is easing lower on Tuesday against both the US dollar and the euro as investors book profits following sterling's impressive monthly rally in August. GBP/USD booked the strongest gains in 10 months in August as the USD fell 2.2% in August against its major peers.
The pound is drifting lower today despite UK consumers showing signs of life in August. UK consumer spending increased modestly last month, boosted by spending on food and drink amid warmer weather, adding to signs of steady economic growth in H2 of 2024.
According to Barclays, consumer spending on credit and debit cards rose by 1% in August after two months of declines, and according to the British Retail Consortium, spending in shops rose by 1%, its strongest pickup since March.
The data supports the view that consumers could increasingly support the economy in the second half of the year amid growing real incomes, easing interest rates, and improving consumer confidence.
Meanwhile, the US dollar is inching higher today against its major peers, hovering around a 2-week high as traders come back from the long weekend and look at US ISM manufacturing data.
GBP/USD forecast – technical analysis
After running into resistance at 1.3265, GBP/USD has eased lower, testing support at 1.3140, the July ’23 high. The pair remains within the ascending channel dating back to late April.
Should the support hold, buyers will look to rise back towards the 1.3230 trendline resistance, ahead of 1.3260 and fresh YTD highs.
Should buyers break meaningfully below 1.3140, the next support is seen at 1.30, the round number, and the mid-line of the rising channel.
USD/JPY looks to ISM manufacturing PMIs ahead of a busy week
- US ISM manufacturing PMI forecast to rise to 47.5
- Data this week could confirm or refute recession fears
- USD/JPY eases to 146.00
USD/JPY is falling after four straight days of gains. The yen is rising towards 146, rebounding from two-week lows, as it tracks a rally in Japanese government bond yields amid a hawkish outlook for BoJ's monetary policy.
Bank of Japan policymakers have recently supported a more hawkish stance should economic projections materialize, and the markets are betting that the central bank will raise interest rates again in December.
Yesterday, Japanese manufacturing PMI was revised modestly higher to 49.8 from 49.5, heading closer to stabilisation.
Today, the USD is holding steady as traders return from the long Labour Day weekend. Attention will be on the US ISM manufacturing survey, which will kick off a busy week for U.S. economic data.
The ISM manufacturing PMI is expected to improve slightly to 47.5 but remains below the 50 level, which separates expansion from contraction.
The data comes ahead of ISM services figures later in the week and Friday's non-farm payroll report. This week's data will either confirm or refute US recession concerns, which were sparked a month ago following a weaker-than-expected US non-farm payroll report.
The market expects the Federal Reserve to cut interest rates in September. However, the size of that rate cut is still up for debate, with the market pricing a 33% probability of a 50 basis point rate cut. Stronger data this week could help rein in expectations of a larger rate cut, lifting the US dollar.
USD/JPY forecast - technical analysis
USD/JPY recovered from support at 143.50 before stalling at 147.20. The price is testing support at 146.40, the 23.6% fib level of the 161.90 high and 141.70 low.
Sellers need to remove 146.40 and 145 round numbers to bring 143.50 back into sight. Below, 141.70 comes into focus.
On the upside, should 146.40 hold, buyers will look to extend gains towards 149.40, the mid-August high and the 38.2% fib level.
