GBP/USD tumbles below 1.2000 on weak UK data, strong US Dollar

• The US Dollar strengthens as 2023 kicks in, as the US Dollar Index gains more than 1%.
• US S&P Global PMI was unchanged, though it remained in contractionary territory.
• Manufacturing activity in the UK plunges for the fifth straight month, adding to recession fears in the UK.

The Pound Sterling (GBP) trimmed some of its earlier losses against the US Dollar (USD) after plunging to the 100-day Exponential Moving Average (EMA), hitting a daily low of 11899. Nevertheless, the bounce was short-lived, even though the GBP/USD climbed to the 1.2000 figure but remained negative in the day. At the time of writing, the GBP/USD is trading at 1.1985, below its opening price by 0.48%.

Solid US Dollar and weak UK PMI weighed on the GBP/USD

Wall Street edges lower as sentiment deteriorates. The US S&P Global Manufacturing PMI for December’s final reading was unchanged at 46.2. Siân Jones, Senior Economist at S&P Global Market Intelligence, said, “The manufacturing sector posted a weak performance as 2022 was brought to a close, as output and new orders contracted at sharper rates. Demand for goods dwindled as domestic orders and export sales dropped. Muted demand conditions also led to downward adjustments of stock holdings.”

Aside from this, Tuesday’s trading session witnessed the greenback’s resurgence. The US Dollar Index (DXY), a gauge of the buck’s value vs. a basket of six currencies, edges up 1.12% at 104.653, hitting new two-week highs, a headwind for the GBP/USD.

On the UK front, Manufacturing PMI, revelated by S&P Global/CIPS, dropped to a 31-month low of 45.3, continuing its downtrend, as it trailed November’s 46.5. should be said that the index has remained below the 50 neutral mark for five consecutive months. Delving into the report, output, new orders, employment, and inventories, decelerated.

Elsewhere, the US economic docket remains busy with the release of the Federal Reserve’s (Fed) last meeting minutes, alongside the ISM Manufacturing PMI Index for December. On the UK front, Mortgage Approvals and Lending would be revealed.

GBP/USD Key Technical Levels