GBPUSD slumps as weak UK PMI data warn of further economic slowdown and increased risk of recession

GBPUSD was sharply lower in European trading on Wednesday, as the price broke pivotal support provided by daily cloud base, with downbeat UK PMI data further souring near-term sentiment and adding to bearish pressure.

UK manufacturing sector showed the weakest performance in August since May 2020 (Aug 42.5 vs July 45.3 and f/c 45.0) and Services PMI fell below 50 threshold (Aug 48.7 vs July 51.5 and f/c 51.0).

The composite PMI which tracks performance in both sectors, fell to 47.9 in August from 50.8 in July and well below 50.3 consensus, adding to signals that the UK economy is on course to shrink during the current quarter and raising risk of recession, as economic activity continues to suffer from elevated inflation and high interest rates.

Fresh weakness already erased the largest part of 1.2616/1.2800 upleg and signal that near-term recovery is over.

Renewed bears pressure initial support at 1.2634 (100DMA), ahead of more significant points at 1.2626 (Fibo 61.8% of 1.2307/1.3141), 1.2620/16 (former double bottom of Aug 3/14) and 1.2590 (June 29 low), with break of these levels to generate strong bearish signal.

Near-term action remains weighed by thick daily cloud, with rising negative momentum and daily Tenkan-sen / Kijun-sen in bearish setup, contributing to negative outlook.

However, bears may face increased headwinds at this zone, following recent three falls breaks here.

Res: 1.2665; 1.2708; 1.2724; 1.2764
Sup: 1.2616; 1.2590; 1.2504; 1.2391