GBP/USD clings on but UK economy faces tough road ahead

This morning saw the GBP/USD bounce off its lows as the buyers stepped in to defend the 200-day average (1.2130ish) after a two-day decline. But the growing macro risks in the UK suggests this might prove to be a temporary bounce, while the dollar has also found renewed strength in recent trade.

In fact, the UK faces a period of mass disruption in December, which could not come at a worse time. Hundreds of thousands of workers across the country are going to strike across industries in disputes over pay, pensions, jobs and conditions. Among others, they include rail staff, bus drivers, nurses, civil servants and postal workers. Given that this is happening just weeks before Christmas, we could see a noticeable hit to an already weak economy.

With UK services and manufacturing PMIs remaining well in the contractionary territory of below 50.0, the industrial action is only going to weigh further on economic activity. The construction PMI also collapsed in November as we found out the day before, as it barely remained above the expansionary threshold. At 50.4, it came in well below 53.0 expected, falling noticeably from 53.2 in October. And today, there was more gloomy news, this time from the housing market. The Halifax House Price Index plunged a massive 2.3% m/m in November, causing the annual rate to dip to +4.7% from 8.2% previously.

Meanwhile, across the Atlantic, the US economy is holding its own relatively better. We have had a few hotter-than-expected US macro pointers in recent days, which have seen investors buy the dip in the dollar. The greenback had fallen further last week after Powell was less hawkish than expected. But now it has found decent support on the back of expectation that the stronger data may yet encourage the Fed to continue tightening interest rates so that it climbs above 5% before the cycle is paused.

Anyway, the cable is at risk of coming under renewed pressure and the trigger could be a daily close below the 200-day average. So, if that happens, then watch out below!

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.