Pound Takes a Hit Against Dollar as Manufacturing Data Looms

• Sterling drops to 1.3480 as the Dollar finds strength ahead of US market reopening

• Markets brace for US Manufacturing PMI - likely still in contraction territory

• BoE hawks holding firm against rate cuts despite slowing economic indicators

I watched the Pound tumble against the Dollar this morning, dropping to around 1.3480 during European trading. Typical - the moment I take a position, the market moves against me! The Greenback's getting a boost as US traders return after their Labor Day weekend, with everyone holding their breath for those manufacturing numbers coming later.

The Dollar Index has climbed back near 98.00, and honestly, I'm not surprised. Trump's tariff policies are reshaping market expectations faster than most analysts can keep up with. Looking at today's upcoming ISM Manufacturing PMI, economists expect it at 49.0 - still below that critical 50 threshold but slightly better than last month's 48.0. I'll believe that improvement when I see it.

What really matters in these reports isn't just the headline number - it's those sub-indices on prices and employment. With Trump's tariffs starting to bite, I'm betting we'll see inflation pressures building in the manufacturing sector before they hit consumer prices. The market isn't fully pricing this in yet.

Sterling's been relatively quiet this week with an empty UK economic calendar, but don't let that fool you. The currency's been floating on borrowed time, supported mainly by expectations that the Fed will cut rates in September. Meanwhile, the BoE seems determined to play tough - Catherine Mann was crystal clear last week that rates need to stay high longer, arguing inflation is still too persistent.

The real action this week will come from US employment data - JOLTS openings, ADP numbers, and Friday's big NFP report. After those dramatic downward revisions to previous months' job figures, another weak report could send markets into a tailspin.

Technically, Sterling looks vulnerable below 1.3500. It's trading near its 20-day EMA (1.3468) in what appears to be an inverse Head and Shoulders pattern on the daily chart with the neckline around 1.3580. That would typically signal a bullish reversal, but with these PMI numbers looming, I'd be cautious about jumping in too quickly.

Support sits at 1.3400 (the August 11 low), while resistance waits at 1.3790 (July 1 high). The RSI between 40-60 suggests we're in for more choppy, indecisive trading until these economic releases provide clearer direction.

The manufacturing data might just be the catalyst that breaks us out of this range - one way or another.