Insights 
VT 
Key Points:
- UK Composite PMI dips to 49.4 vs. 50.8 expected.
- Sterling pares earlier gains, now trading around $1.3399.
- S&P warns of softening inflation and job market, leaving BoE open to cuts.
Sterling reversed earlier gains on Wednesday after the UK’s latest PMI report signalled a surprise contraction in private sector activity, casting fresh doubts over the economic recovery and fuelling expectations of further monetary easing.
The GBP/USD pair dropped to a session low of 1.33964 after the S&P Global/CIPS composite PMI fell to 49.4 in May, down from 48.5 in April. Economists had forecast a rebound to 50.8, a threshold that separates growth from contraction. The pound briefly traded as high as 1.3441 before the data but quickly lost momentum.
Chris Williamson, Chief Economist at S&P Global Market Intelligence, said the report highlighted “cooling inflation pressures, weakening demand, and rising job losses,” all of which signal that the Bank of England may need to cut rates to support the economy.
Technical Analysis
GBP/USD retreated after peaking at 1.3469, struggling to sustain momentum above the 1.3440 resistance level. Despite a sharp early climb, the pair reversed and is now consolidating near 1.3400, closing the session at 1.33988. The MACD histogram has flipped into negative territory with a bearish crossover forming, while moving averages (5, 10, 30) are beginning to flatten and curl lower—suggesting a possible short-term reversal.
Picture: GBP/USD slips from 1.3469 peak, with bearish MACD crossover hinting at deeper pullback risk, as seen on the VT Markets app
Support at 1.33757 is in focus as bearish momentum intensifies. If broken, this level could open the door to 1.3350. On the upside, bulls must reclaim 1.3420 and clear 1.3440 with conviction to resume the upward trend. Until then, the intraday bias leans cautious, with selling pressure gradually building.
Cautious Forecast
With UK macro data continuing to underwhelm and global risk sentiment fragile, the pound may remain under pressure. While not yet a collapse, GBP/USD could test deeper support around 1.3350 in coming sessions, especially if dovish BoE rhetoric builds. Thursday’s GfK consumer confidence data and any BoE commentary will be closely watched.
