Britain’s Economic Performance Remains Optimistic Amid Strong Manufacturing Sector

Britain’s manufacturing sector posted its strongest monthly performance in more than two years in August, a survey showed on Monday, as domestic demand offset a decline in exports. The British pound has retreated from its highs against the U.S. dollar in recent days, but the overall upward trend remains unchanged.

UK Manufacturing PMI Rises to 52.5 in August

Data show that the final value of the UK SPGI Manufacturing Purchasing Managers Index (PMI) in August rose to 52.5 from 52.1 in July, the highest level since June 2022. Britain’s economy has been stronger this year than forecasts by institutions including the Bank of England, a favorable backdrop for new Prime Minister Starmer as he seeks to accelerate growth.

Bank of England Expected to Keep Interest Rates on Hold

The Bank of England is expected to keep interest rates on hold this month before cutting them in November, which would be the second cut since 2020. The Bank of England said it could not yet declare victory over inflation, especially in Britain’s services sector.

U.S. Non-Farm Payrolls Report to be Released on Friday

This week, market attention will be focused on the U.S. non-farm payrolls report for August released on Friday. Economists predict that the United States will add 165,000 jobs in August, up from 114,000 last month. It is worth mentioning that the non-farm payroll data in July was the lowest since December 2020, significantly lower than expected.

Federal Reserve Watch: Interest Rate Cut Probabilities

According to CME’s “Federal Reserve Watch”, the probability of a 25 basis point interest rate cut in September is 69%, and the probability of a 50 basis point interest rate cut is 31%. The probability that the Fed will cut interest rates by 50 basis points cumulatively by November is 49.9%, the probability that it will cut interest rates by 75 basis points cumulatively is 41.5%, and the probability that it will cut interest rates by 100 basis points cumulatively is 8.6%.

GBP/USD Analysis

If the U.S. non-farm payrolls report in August falls short of expectations, it will increase investors’ concerns about the U.S. job market and increase market expectations for an interest rate cut by the Federal Reserve this year, further suppressing the trend of the U.S. dollar index and conducive to the rebound of the pound against the U.S. dollar.

Technically, the pound fell under pressure against the US dollar at the beginning of this week, continuing last week’s high correction trend, and the short-term trend has weakened. On the daily K-line chart, GBP/USD has fallen below the lower track of the upward channel, and the market’s bearish atmosphere has become stronger.

Key Levels for GBP/USD

The initial resistance for GBP/USD is at 1.3180, further resistance is at 1.3260, and the key resistance is at 1.3350. The initial support for GBP/USD is at 1.3020, further support is at 1.2950, and the key support is at 1.2900.