GBPUSD Faces the 50 SMA After UK Construction PMI

Throughout much of August, GBP/USD saw significant bullish momentum, climbing by 6 cents. However, traders are now unsure if the pair will continue to push toward new yearly highs or whether the trend has reached its peak after the pullback from the highs, while today’s Construction PMI from the UK didn’t offer much in terms of price action, however it showed that the sector remains in decent shape.

GBP/USD Chart H4 – The 50 SMA Turned Into Resistance

Last week, the USD found some support, pushing GBP/USD down by 1.5 cents, but yesterday’s reversal saw the pair recover almost 100 pips on the back of disappointing JOLTS jobs data from the US. Resistance at the 50 SMA Despite this recovery, the 50 SMA (yellow) on the H4 chart acted as resistance, rejecting the price on its first attempt. The market reaction to weaker-than-expected JOLTS job openings, which came in at 7.673 million, missing the forecast of 8.1 million and down from the revised 7.91 million in the previous month, gave the GBP a temporary lift.

However, the bullish trend appears cautious at key resistance levels. Rate Cut Expectations and Future Outlook With the Federal Reserve widely expected to initiate rate cuts starting on September 18, markets are pricing in a 50 basis point cut to begin the easing cycle. Despite Wednesday’s intraday recovery, GBP/USD remains lower than its two-year high of 1.3265 reached in late August. The pair maintains a firm bullish outlook as long as it holds above the 200-weekly SMA, but traders will closely watch how price action behaves near current highs.

UK August Construction PMI Report by S&P Global – 5 September 2024

• UK August construction PMI 53.6 points vs 54.9 points expected
• July construction PMI 55.3 points

The latest data shows that the UK construction sector remains healthy, despite a slight dip compared to July. Here’s an overview:

• New Orders: Growth remains solid, particularly in housing, which saw its fastest growth rate since September 2022.
• Commercial Activity: Continues to be the best-performing sector, although civil engineering is also expanding, indicating broad-based sector strength.

HCOB Insights:

• House Building: The construction sector has rebounded after a difficult start to 2024, with housing seeing a notable resurgence. Residential building activity expanded at its quickest pace in nearly two years, driven by lower borrowing costs and a gradual recovery in market conditions.
• Commercial Construction: While still the top-performing segment, the post-election boost in demand slightly waned in August. However, stronger order books, supported by an improving UK economic environment, kept the sector buoyant.
• New Work: A robust rise in new projects was recorded in August, with incoming work expected to fuel further growth across the construction sector in the coming months.
• Business Optimism: Sales pipelines and demand conditions have improved, leading to increased optimism. Still, some firms voiced concerns about civil engineering and infrastructure project outlooks, suggesting these areas may face challenges in the near future.

GBP/USD  Live Chart