GBP/USD declines towards 1.1400 on consolidation breakdown, US ISM Services PMI in focus

• GBP/USD is eyeing weakness to near 1.1400 as a corrective move, however, the upside remains favored.
• Pound bulls have been strengthened after the UK govt. rollback the tax reduction memorandum.
• A lower-than-expected reading of the US ISM Services PMI gamut will weaken DXY further.

The GBP/USD pair has delivered a downside break of the consolidation formed in a range of 1.1420-1.1490 in the Tokyo session. The asset is expected to drop further to near the round-level support of 1.1400 as a correction was highly expected after a juggernaut rally. However, the corrective move is expected to be mild and won’t impact the upside bias on higher timeframe.

Broadly, the pound bulls are performing on an extremely bullish note after the UK administration rollback the memorandum of tax cuts to support households against the bumper paychecks. The move of reducing taxation received criticism from think tanks in the market as it was expected to spurt the inflationary pressures firmly.

Also, the move of tax reduction was resulting in a clash of interest as on one side the Bank of England (BOE) is continuously hiking interest rates to tame the mounting inflation. The decision of rollback has highlighted that the UK economy still needs time to get politically stable after Liz Truss becomes the UK Prime Minister.

Meanwhile, the US dollar index (DXY) is witnessing a rebound move after defending the critical support of 110.00. The rebound move seems less reliable due to the unavailability of strength and will terminate sooner ahead. Going forward, the US ISM Services PMI data will hog the limelight. As individuals have postponed their demand for durable goods, the economic data is expected to display a vulnerable performance.

The Services PMI data is expected to decline to 56.0 against the former print of 56.9. Also, the New Orders Index data that indicates forward demand for services will slip to 58.9 vs. the prior release of 61.8.