The British pound has extended its gains in the Friday session. GBP/USD is currently trading at 1.3555, up 0.58% on the day.
UK Manufacturing PMI slows
The UK economy continues to recover from the Covid pandemic. However, the unleashing of demand from consumers and businesses has resulted in a host of problems for the manufacturing sector. These include supply chain bottlenecks, higher material costs and worker shortages. These problems resulted in a slowdown of the sector in September, as the Manufacturing PMI fell to 57.1, down from 60.3 in August. Although we continue to see growth in manufacturing, the rate of expansion has eased for a fourth consecutive month, and the September reading marked a seven-month low. Still, manufacturers remain optimistic about being able to meet new orders, and investors are unlikely to get nervous unless the PMI slips close to the 50-level, which separates expansion from contraction.
In the US, there are plenty of matters for investors to fret about as we end the trading week; namely, the debt ceiling and possible government shutdown, as well as the build-back-better infrastructure bill which President Biden is trying to get past the House of Representatives.
Lawmakers have reached a deal to fund the government until December 3, which is really kicking the can down the road until the issue must again be addressed. The House had scheduled a vote on the infrastructure bill for late Thursday, but House Speaker Nancy Pelosi was forced to pull the bill and delay a vote since the opposition of Republicans and progressive Democrats meant that there were not enough votes in favor of the bill. These difficulties point to the weakness of President Biden, who faces still opposition not just from Republicans, but from progressive Democrat lawmakers as well. Until the debt ceiling issue is resolved, risk aversion will likely remain high, which is bullish for the US dollar.
GBP/USD Technical Analysis
- 1.3603 has weakened in resistance. 1.3747 is the next resistance line
- 1.3535 is fluid as a support level. Below, there is support at 1.3459
