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UK Services PMI Sets a 6.5-Year High, Pound Rallies

UK Services PMI Sets a 6.5-Year High, Pound Rallies

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK services PMI rises above 60 for the first time in over six years -> BoE expected to release guidance later this week -> Pound rallies

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UK Purchasing Managers’ Index for services rose to a new 6 year high, further supporting expanded GDP growth according to the Markit release.

The services PMI for July was reported at 60.2, beating expectations for 57.4 and higher than 56.9 in June. The manufacturing PMI was also released last week higher than expected, at 54.6 for July. Both indexes were above the 50.0 line, indicating an increase in sector activity.

The improved PMI numbers follows the Bank of England’s comments in July that the current economic recovery is weak based on historical standards. In August, the Bank of England pushed off forward guidance unit later this week. Improvements in economic indicators may discourage further dovish comments and are therefore considered Pound positive. “While there were again reports that the better weather bolstered activity during July, the service sector appears to have genuine momentum with underlying economic conditions and business confidence rising,” said Markit Senior Economist Paul Smith.

A new weekly high of 1.5366 was set in GBP/USD trading following the release, and a monthly high at 1.5434 may now provide resistance. A weekly low near 1.5100 may see support.

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GBPUSDDaily: August 5, 2013

UK_Services_PMI_Sets_a_6.5-Year_High_Pound_Rallies_body_eurusd_daily_chart.png, UK Services PMI Sets a 6.5-Year High, Pound Rallies

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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