GBP/USD prints fresh 2-year lows below 1.1500 as US dollar soars

• US dollar strengthens following ISM Manufacturing PMI, ahead of NFP.
• GBP/USD drops for the fifth consecutive day.
• The multi-decade low waits at 1.1409 (March 2020).

A stronger US Dollar pushed GBP/USD to levels under 1.1500 for the first time since March 2020. The greenback is rising sharply following upbeat US economic data, amid risk aversion and higher yields. The pair bottomed at 1.1497 and then rebounded toward 1.1550, trimming losses.

The US Dollar Index is at the highest level since 2002, up 1% for the day. The dollar was trading in positive ground and rose further following the US ISM Manufacturing August report that showed better-than-expected numbers, including a recovery in the employment index and a slowdown in prices. Earlier, the weekly jobless claims report also came in above expectations. Attention now turns to the Non-farm payrolls report to be released on Friday.

The economic figures weighed on the demand for Treasuries sending US yields further to the upside. The US 10-year yield stands at 3.28%, a level last seen in June.

The last leg to the downside in GBP/USD was driven by the rally of the dollar across the board. Cable is falling for the fifth consecutive day on Thursday headed toward the lowest weekly close since 1985.

Despite showing some signs of stabilization, like a retreat in EUR/GBP, the pound remains among the weakest currencies of the G10 affected by the deteriorating outlook for the UK economy. Also market participants show concerns about the next prime minister. Liz Truss is holding the lead in the polls over Rishi Sunak. The winner of the Tory will be announced on Monday and will succeed PM Boris Johnson.

Despite the turmoil, there are still expectations of a 75 basis points rate hike from the Bank of England in September to curb inflation that, according to some a Goldman Sachs reports could reach 22% next year.

Technical levels