GBP/USD Above 1.6600 Despite Manufacturing PMI At A 15-Month Low
- UK Manufacturing PMI SA (Aug): 52.5 Actual Vs 55.1 Estimated; 55.4 Prior.
- GBP/USD Plunges More Than 25 Pips After UK Manufacturing PMI Disappoint.
- Looking Ahead BoE Rate Decision (Sep): 0.50% Estimated; 0.50% Prior.
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According to Markit, UK Manufacturing PMI came in at 52.5 in August compared to 55.4 in July. A gauge used to monitor the economic health of UK’s manufacturing sector exceedingly missed market expectations of 55.1. Although a reading above 50 signals expansion, the British manufacturing activity seems to have decelerated. This print is the slowest expansion since June 2013. The UK economic data deterioration relative to consensus forecasts since late February continues, suggesting investors are over-estimating the resilience of the UK economy says DailyFX Currency Strategist Ilya Spivak.
Prior to the Manufacturing PMI reading, the British Pound grinded higher against the US Dollar to trade above the psychologically important 1.6600 level. However, as the data disappointed, GBP/USD plunged over 25 pips amid keeping its head above the 1.6600 level
Later in the week, traders’ focus will turn to the high profile Bank of England Rate Decision that is scheduled to be released at 11:45 GMT on Thursday. The BoE is expected to leave rates unchanged at 0.50 percent, which was held since February 2009. This is on the backdrop of last month’s BoE Minutes that revealed an interest rate vote of 7-2 from 7-0 in the prior count by the MPC members.
From a technical standpoint, Ilya Spivak mentions near-term resistance-turned-support to rest at 1.6612-29 area (14.6% Fib Ret.) and near-term resistance at 1.6661 (23.6% Fib Exp.). He remains flat for now as he argues against entering short with prices trading in close proximity to support level and there is an absence of a defined bullish reversal signal. Meanwhile according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the GBP/USD stands at 1.72 as 63 percent of traders are long.
GBP/USD 5 Minute Chart
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Edward Hyon, DailyFX Research Team
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