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Forex News: Sterling Moves Lower as UK Sees Contraction in Services Activity

Forex News: Sterling Moves Lower as UK Sees Contraction in Services Activity

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK Services PMI for December reported at 48.9, disappointing expectations for expansion -> BoE says unsure about Q4 growth -> Sterling continues decline

UK services activity contracted for the second time in 3 years in December, according to Markit’s Purchasing Manager’s Index. The PMI was reported at 48.9, which disappointed expectations for the survey to remain at 50.2 for a second month. A PMI below 50.0 indicates contraction in the surveyed sector.

The reported drop in services comes only a few days after a rise in UK manufacturing was reported by Markit for the same month. The Bank of England has previously said that it is not confident that the rise in GDP seen in Q3 will continue in Q4, and today’s PMI could come as bad news for Sterling investors.

Also reported today, 54,000 mortgages were approved in the UK in November, which was as expected. Also, the M4 money supply was 0.2% lower in November.

The lower than expected PMI did not seem to have an immediate effect on the British Pound. However, GBPUSD has now resumed its decline towards 1.6000 following yesterday’s release of the minutes from the last Fed meeting and ahead of today’s US jobs reports. The pair might see support near here from a combination of a falling trend line from early 2011 and the 100 day simple moving average.

GBPUSD Daily: January 4, 2013

Sterling_Continues_Decline_as_UK_Sees_Contraction_in_Services_Activity_body_gbpusd.png, Forex News: Sterling Moves Lower as UK Sees Contraction in Services Activity

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