GBP/USD sub 1.3700 handle ahead of US-data

• Coming up next at 13:45 and 14:00 GMT, is the US manufacturing Purchasing Managers Index (PMI) from both Markit Economics and the Institute for Supply Management (ISM) for the month of April. 
• The cable is on the back foot trading below the 1.3700 handle as the UK manufacturing PMI earlier in the day came below expectations.

The GBP/USD is trading at around 1.3659 down 0.73% on Tuesday. 

The cable got hit by a wave of selling yet again earlier in the European session as macroeconomic data from the United Kingdom follows its recent pattern of consistently coming below market’s expectations. 

The pair remains extremely soft trading now below the 1.3700 handle as market participants are shifting their attention to the Manufacturing Purchasing Managers Index (PMI) from both Markit Economics and the Institute for Supply Management (ISM) for the month of April. A strong reading should support the USD while a disappointment is unlikely to put a stop to the strong bull trend in the US dollar. The pivotal point of the week is most likely going to be the FOMC meeting on Wednesday at 18:00 GMT. The Federal Reserve Bank is widely expected to announce a rate hike in June and this can accelerate the USD demand. On the other hand, if the Fed sounds cautious and telegraphs that a rate hike is not on the cards in June, the greenback can suffer. 

Earlier in the UK, the manufacturing PMI decelerated to 53.9 versus 54.8 expected by analysts. This is the lowest it has been since late 2016. Analysts at ING argue that it can’t all be blamed on weather conditions. The slowdown in the Eurozone economic activity coupled with a stronger British pound is starting to drag on the UK’s manufacturing sector. To a lesser extent, the protectionist sentiment is also weighing. However, manufacturing only counts for around 10% of the UK economy and the services PMI on Thursday will have a much greater impact on the Bank of England policy. Nevertheless, the odds of a rate hike in May have once again shrunk greatly after today’s manufacturing PMI release and it will be doubtful that even stellar services PMI on Thursday could really shift around the negative sentiment on the GBP.

GBP/USD 4-hour chart 

The trend is bearish. The main resistances are seen at the 1.3700, 1.3800 and 1.3900 handles while supports are priced in at 1.3600 figure and 1.3457 swing low.