Cable Bears Probe Yesterday’s Low

Cable bears force a test of yesterday’s worst levels as the flash services PMI data provides the latest in a series of disappointing UK data prints.

• The survey collator noted that “the disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK… Underscoring the severity of the UK's deteriorating situation, September's downturn is the steepest since the height of the global financial crisis in early 2009 barring only the pandemic lockdown months.”
• Elsewhere, survey findings suggested that “a major concern in the inflation outlook has been wage growth, but with the survey now signalling the sharpest fall in employment since 2009, wage bargaining power is being eroded rapidly.” Dynamics in this arena will be key for the Bank of England in the months ahead after yesterday’s decision led to participants questioning the viability of another rate hike in the current cycle (many economists now look for no further hikes, while terminal policy rate pricing indicates ~18bp of hikes)..
• GBP/USD finds a base just above yesterday’s low ($1.2239), last showing back around $1.2250.
• Cable remains in a clear downtrend. The focus is on $1.2227, a Fibonacci projection. On the upside, initial firm resistance is seen at $1.2548, the Sep 11 high. Short-term gains would be considered corrective.