GBP/USD rallies sharply, above 1.1860 on mixed US/UK PMIs

• GBP/USD jumps from YTD lows after US economic data reignited recession fears.
• US S&P Global PMIs were mixed, though reignited recession fears.
• The S&P Global Manufacturing PMI in the UK dropped to the contractionary territory.
• GBP/USD Price Analysis: If it clears 1.1900, a test of 1.1936 is on the cards.

The GBP/USD recovered some ground bouncing from weekly lows below the 1.1800 figure due to dismal US economic data, which increased fears of a US recession. Consequently, the greenback fell, alongside US T-bond yields, while most G8 currencies advanced. The GBP/USD is trading at 1.1860, after hitting a YTD low at 1..1716, so the major swang more than 100 pips as a reaction to the abovementioned data, while sentiment shifted positively, with US equities gaining.

The US and UK S&P Global PMIs came mixed; consequently, the greenback weakened

The US S&P Global PMI Composite for August showed that business activity in the US contracted for the second consecutive month. On the contrary, the Manufacturing PMI, although slowed, remained in expansionary territory, at 51.3, lower than expected.. The figures portray the Composite Index at 45, less than estimates of 47, while the Services PMI plunged to 44.1, below forecasts.

Meanwhile, during the European session, S&P Global revealed that August UK Manufacturing PMI plummeted into contractionary territory, falling to 46.0, shy of estimates of 51.1, driven by high energy prices across Europe, supply chain disruptions, and higher interest rates. Contrarily to the US, the UK’s Services PMI was unchanged at 52.5, while the Composite PMI  downtick to 50.9.

What to watch

The US economic docket will feature Durable Good Orders for July, alongside Housing Data, illustrating that the US economy is slowing down on Wednesday. A light calendar will feature CBI Distributive Trades on the UK front on Thursday.

GBP/USD Price Analysis: Technical outlook

The GBP/USD is climbing as buyers eye a test of the August 19 daily high of 1.1935. Once the GBP/USD cleared the figure at 1.1800, followed by the August 22 daily high at 1.1836. The next resistance will be the 1.1900 figure on its way towards the August 19 daily high. Despite that the pound is staging a comeback, the Relative Strength Index (RSI), is still in negative territory, so caution is warranted.