GBP/USD struggles to hold above 1.30 despite USD weakness

The GBP/USD pair climbed to 1.3015 after the PPI data from the U.S. failed to match the market consensus but had a tough time preserving its gains. At the moment, the pair was trading at 1.2990, losing 0.12% on the day.

Although the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, dropped to a fresh session low at 93.35 in the last hour, the GBP/USD pair failed to take advantage of that. The escalating North Korea tensions keep the demand for the traditional safe-havens high in the NA session. In fact, the GBP/JPY pair is losing nearly 300 pips on the day as it tests its weekly low around the 142 handle. Stock markets continue to get hammered as investors seek refuge with the German DAX closing the day 1.1% lower while the UK FTSE 100 drops 107.5 points (-1.4%).

• US Dollar tests lows in the 93.40/35 band

Earlier in the day, the data from the U.K. showed that the industrial production expanded by 0.5% in July on a monthly basis after contracting by 0.1% in June. However, the recent GBP strength weighed on the UK exports, ramping up the trade deficit to 4.56 billion GBP, not allowing the cable to gather further strength against its peers.

Later in the session, the Financial Management Service in the U.S. will release the Monthly Budget Statement but the market sentiment is likely to be the primary driver of the price action.

Technical outlook

1.2950 (50-DMA) acted as a tough support during the day for the pair. A daily close below that level could open the door to 1.2910 (100-DMA) and 1.2810 (Jul. 12 low). On the upside, resistances align at 1.3000 (psychological level), 1.3070 (20-DMA) and 1.3160 (Aug. 4 low).

• GBP/USD still bearish, a test of 1.2900 appears unlikely – UOB