For the second day in a row, British PMIs disappoint. Construction PMI scored 53.3 points, significantly lower than last month’s 56.4 points, and also less than the low expectations of 55.6 points. The pound is falling on this additional sign of weakness in the British economy.
GBP/USD now trades at 1.6460, down over 60 pips from 1.6515 before the release. It seems that there were high hopes for this number, contrary to leaks about such numbers in other cases. Note that EUR/GBP crossed the 90 cent line – the pound is weakening across the board.
Yesterday, the manufacturing sector disappointed. This sector, which pushed the economy earlier in the year, has undergone significant slowdown in the past two months, with the score diving quickly from above 60 points to 54.6 now.
BOE Governor Mervyn King, that warned against the consequences of a rate hike, has now more reasons to wait. A rate hike now will hurt the very fragile economy, as reflected by these numbers.
Earlier today, GBP/USD managed to recover, escape the lows of the 1.6430 support line and climb back above 1.6515.
Resistance is found at 1.66 and 1.67. Support is at 1.6430 and the region of 1.6280 – 1.63. For more technical analysis and upcoming events (we have another PMI tomorrow), see the GBP/USD Forecast.
In other British news: net lending to individuals, which is another gauge of economic activity, dropped to 500 million pounds, much lower than 1.7 billion that was expected, and also here, lower than last month’s 2 billion.
M4 Money Supply, which is a second-tier gauge of inflation, rose by only 0.1%. This is better than last month’s drop of 0.3%, but also here, short of expectations for a rise of 0.4%. One figure that was positive was the final read of mortgage approvals. It was unexpectedly revised to the upside, from 44K to 48K.
