British Pound cracks as US growth burst boosts USD

The British Pound (GBP) has plummeted in value against the US Dollar (USD) as US economic indicators suggest increased business activity, while concerns surrounding a potential US diesel export ban have driven crude prices higher. The GBP/USD rate currently stands at 1.3253, marking its lowest point since July 1. Rising oil prices, denominated in US Dollars, are contributing to the strength of the Greenback.

The US Dollar Index (DXY), which gauges the performance of the USD against six currencies, has risen 0.52% above the 101.00 mark for the first time since July 30. According to S&P Global, the Flash Manufacturing PMI in September exceeded expectations, with September's reading at 57, up from the estimated 53.5 and the previous month's 53.9.

Similarly, the Services PMI expanded from 56.5 to 58.7, surpassing forecasts, and the Composite PMI climbed from 56 to 58.4. Chris Williamson, a chief business economist at S&P Global Market Intelligence, noted that "business is clearly booming" in both manufacturing and services, citing supply chain bottlenecks and staff shortages as challenges faced by businesses amid robust growth.

Federal Reserve Governor Michael Barr hinted that further interest rate hikes may be required to achieve the 2% inflation target, aligning with other hawkish voices on the Federal Open Market Committee (FOMC). This has prompted traders to anticipate higher US interest rates, with the likelihood of a Fed rate hike in the October meeting now at 70%, up from 52% just a day earlier.

In the UK, the S&P Global business activity index revealed that manufacturing and services activity continued to grow but decelerated in September compared to the previous month. Upcoming events in the UK include speeches from Bank of England officials and the GfK Consumer Confidence report for September. In the US, traders will focus on speeches by Fed officials Beth Hammack and Anna Paulson, along with jobless claims data.

Technical analysis indicates that GBP/USD is currently trading near 1.3255, below key support levels and hovering under the cluster of 50, 100, and 200-day Simple Moving Averages (SMAs), suggesting a bearish outlook. The Relative Strength Index (RSI) of 26 underscores oversold conditions, yet multiple broken upward trend lines pose a threat to any recovery attempts.

The immediate resistance level lies at the earlier trend-line break near 1.3333, followed by the prior rising trend support around 1.3360 and the recent trend-line break at 1.3447. Should the pair break above these levels, it could encounter resistance at the dense SMA cluster near 1.3476 and the previous breakout zone at 1.3508.

The broader market remains cautious, with no clear support to counteract a potential further decline.