GBP/USD forecast after the strong UK services PMI data

The GBP/USD pair held steady on Tuesday after the relatively strong services and composite PMI numbers from the UK. The pair rose to a high of 1.3145, which is in the same range as it has been in the past few days.

UK services sector doing well

The services sector in the UK did well in March as the impacts of the past lockdowns started easing and as more people went back to work.

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According to Markit, the country’s services PMI increased modestly from 60.5 in February to 62.6 in March this year. This increase was better than the median estimate of 61.0. 

As a result, the composite PMI rose from 59.9 to 60.9 in March. Again, this increase was also better than the expected 54.5. 

The performance of the services sector was in contrast to what happened in the manufacturing side. The manufacturing PMI declined to a 13-month low of 55.5 as companies continued to experience logistical challenges.

Manufacturers and service providers have lamented the rising cost of doing business. In the past few months, the overall prices of items have risen sharply. Sadly, the situation will continue to worsen as the crisis in Ukraine continue.

Therefore, the GBP/USD pair has been under pressure as investors worry about the actions of the Bank of England (BOE). The bank is expected to take a strategic pause before resuming rate hikes in the coming months. 

The pair has also struggled because of inverting yield curve in the US. The yield inverted for the first time in years, pushing investors to worry about the impending inversion. This inversion was the highest since 2007, pushing many analysts to predict that a recession is coming.. In a recent note, Michael Howell said:

“The efficacy of the yield curve slope as a predictor of the business cycle is improved enormously when it combines, like now, with high convexity. In short, the fixed income markets are exactly on track and already starting to discount an upcoming U.S. recession.”

GBP/USD forecast

The hourly chart shows that the GBP/USD pair has been in a consolidation phase in the past few days. Along the way, the pair has formed a symmetrical triangle pattern. It has also moved slightly above the 50-day moving average.

Therefore, there is a likelihood that the pair will soon have a breakout since the triangle pattern is nearing its confluence level.

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