The British pound sterling paired with the US dollar initially declined on Thursday morning but stabilised later. The current GBPUSD exchange rate stands at 1.2717.
The morning stress could be attributed to the execution of certain trading signals. Interestingly, this is the third time in the past couple of weeks that the pound slid down without leading to a trend reversal.
However, beyond technical factors, there are underlying reasons for the pound's weakening. The latest data on the manufacturing PMI released yesterday revealed that the indicator fell to a 39-month low, reaching 42.5 points. Business activity in the UK services sector contracted to a 7-month low, reaching a level of 48.7 points.
Consequently, the odds of an inevitable economic downturn in the UK are growing. The increasingly noticeable deterioration in the manufacturing sector conditions goes hand in hand with a slowdown in non-manufacturing sector activity. The UK's GDP may contract by 0.2% in Q3, which is very concerning.
The Bank of England is expected to raise the interest rate by 25 basis points at its meeting on 21 September. However, further tightening of monetary conditions appears unlikely due to doubts about the economy's ability to handle it. These factors collectively exert pressure on the GBP positions.