Sterling advanced on Monday and capitalized on a weaker dollar, with the GBP/USD pair trading 0.45% higher during the London session, changing hands at around 1.36750.
The greenback has been down against most of its major peers, and the dollar index dropped some 0.20% to trade near 93.30.
Manufacturing stays strong, services weaken
Earlier in the day, traders paid attention to the UK PMIs. The manufacturing sector ticked lower but came out above market expectations and printed 60.1, versus 60.4 previously. However, the services PMI dropped notably to six-month lows of 55.5 from 59.6 in July. The services sector is usually more important for the overall economy, and it appears a bigger slowdown is ahead. Nevertheless, the Pound failed to react in a bearish way and stayed elevated.
Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter.
US data in focus now
A batch of US data will be released later in the day. The Markit manufacturing PMI for August is seen slowing slightly to 62.8 from 63.4 previously, while the services sector should slow to 59.4. In addition, the final composite PMI is expected to decline modestly to58.3 from 59.9 previously.
Additionally, existing home sales are forecast to rise 1.3% month-on-month to 5.81 million units.
Jackson Hole Symposium takes center stage
Volatility is expected to gradually increase over the next few days as the much-expected Jackson Hole Symposium starts on Thursday. The market wants Jay Powell to announce tapering, and it appears he will need to do so. Therefore, the USD might accelerate higher on Thursday, but at the moment, the wait-and-see approach might be the best strategy.
Cable defending major support
From the technical point of view, the pair has managed to defend the key support of 1.36, and it is now forming a double bottom pattern. As long as the price remains above 1.36, the short-term outlook appears bullish.
If the Pound drops below 1.36, large stop-losses of long positions will be hit, most likely sending the pair immediately to 1.35.
Alternatively, the resistance is spotted near previous lows at 1.3790, and cable needs to get back above it to turn the medium-term outlook from bearish to neutral.