Currency pair GBP/USD refrained from hitting a break below 1.40 during the Easter holidays, but the relief is predicted to exit soon if trade war concerns pull stocks lower and UK PMI loses estimates by a wide margin.
Currently, the GBP/USD pair is lightly bid around 1.4060, which is a little lower than the last week’s high of 1.4245.
UK manufacturing Purchasing Managers’ Index (PMI) is believed to show an expansion pace slowing down to 54.4 index points in March compared to 55.2 index points in February.
GBP has zero anti-risk appeal due to its huge current account deficit and Brexit dilemma. This makes the British pound vulnerable to any sharp drop in the European stocks in response to increasing odds of an all-out US-China trade war.
On the other hand, a better-than-expected figure could boost the bid tone around GBP to help it ward off the negative effect of a possible risk aversion in stocks, hence can a below-forecast make matters worse for the currency.
Additionally, the dollar will likely gain from the decreased inflation/growth expectations as represented by the withdrawal in the government bond years across advancement.
“From a technical point of view, the 4 hours chart shows that the pair pulled back to the daily descendant trend line broken last week, meeting selling interest near it and also around a bearish 20 SMA, a sign of bulls being not actually convinced,” wrote FXStreet Chief Analyst Valeria Bednarik.