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GBP/USD under pressure ahead of PMI data, BoE Bailey’s speech. Oil prices rise with debt talks in focus.
 

GBP/USD under pressure ahead of PMI data, BoE Bailey’s speech 

• UK services PMI to ease to 55.5 from 55.9
• BoE’s Bailey testifies before the Treasury Select Committee
• GBPUSD tests 50 sma support

GBP/USD is trading lower for a second session as investors look ahead to PMI data and BoE Governor Andrew Bailey’s speech. 

A lack of fresh fundamentals drivers on Monday saw the pound slip. However, PMI data today could provide some direction. The UK PMI data is expected to show that the services sector continues to expand strongly, making up for a lackluster manufacturing sector.

The services PMI is forecast to ease to 55.5 from 55.9 in April. The manufacturing PMI is set to tick higher to 48 from 47.8. Level 50 separates expansion from contraction.

In addition to the headline figure, the employment and prices sub-component of the services report will be watched closely. A pickup in pricing pressure and a steady employment picture could keep pressure on the BoE to keep raising interest rates. 

In addition to data, BoE Governor Andrew Bailey and other BoE policymakers will be testifying before the Treasury Select Committee on the Monetary Policy Report for May. This comes ahead of tomorrow’s inflation data which will set the scene for the June meeting. 

Meanwhile, the USD is finding support from hawkish Federal Reserve commentary. St Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari both said that they see interest rates rising further. Their comments come after slightly more dovish comments from Fed Chair Jerome Powell at the end of last week. 

US PMI data is expected to show that activity in both the service sector and the manufacturing sector grew at a slower pace. The US composite PMI is forecast to ease to 50 from 53.6.  

Separately UDS debt ceiling talks continue, and while both sides sound optimistic, no deal has yet been reached. 
 

GBPUSD outlook technical analysis 

Having fallen below the multi-month rising trendline and the 20 sma, GBPUSD is finding support on the 50 sma at 1.2420. A break below here and 1.2390, last week’s low, could open the door to 1.2280 the 100 sma, and the February 14 high. 

On the flip side, should the 50 sma hold, buyers could look for a rise above the 20 sma at 1.2510 and the rising trendline support at 1.26 the rising trendline resistance. 

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Oil prices rise with debt talks in focus 

• Oil rises for a second day with debt ceiling talks in focus
• API data is due later
• Oil trades range bound caught between 70.00 and 73.50

Oil prices are edging higher for a second straight day as investors digest the recent developments in US debt ceiling negotiations and after a seasonal rise in gasoline demand. 

Talks resumed between President Joe Biden and House Speaker Kevin McCarthy; both sides said that discussions have been productive. However, there is still no deal on the table, and the clock is ticking towards the X-date at the start of June. The talks are likely to set the tone for the broader risk environment. 

Meanwhile, hawkish comments from Federal Reserve speakers and suggestions from JP Morgan CEO Jamie Dimon that interest rates could go as high as six or 7% could limit the upside for oil. Higher interest rates increase the chances of a hard landing in the US, which would hurt the oil demand outlook. 

For now, the gasoline demand outlook remains upbeat, with gasoline futures higher ahead of the Memorial Day holiday on May 29^th, which is traditionally the start of the peak summer fuel demand season. 

Looking ahead, API crude oil stockpile data is due to be released later after an unexpected build of 3.69 million barrels last week. 
 

Oil outlook – technical analysis 

Oil has been trading range bound in recent weeks, capped on the upside by 73.50 and by 70.00. The RSI is neutral giving away few clues.  

Buyers will look for a rise over 73.50 and 74.50 the 50 sma at 74.50. A rise above here exposes the 100 sma 76.00. 

Meanwhile, sellers could look for a fall below 70.00 the psychological level, the falling trendline support and the weekly low. A break below here opens the door to 66.85, the March 27 low. 

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