GBP/USD Tumbles After Weak Markit/CIPS Manufacturing PMI

Talking Points:

- UK’s Markit/CIPS Manufacturing PMI at 49.2, below the 51.2 expected

- Greater pressure on the service sector to sustain GDP growth, Markit says

- British pound dropped on the news versus other major currencies

Find Key Turning Points for the British Pound with DailyFX SSI

The British Pound traded lower versus other major currencies (at the time this report was written) after today’s Markit/CIPS Manufacturing PMI showed manufacturing fell in April. The manufacturing diffusion index, by Markit Economics, fell to a seasonally adjusted 49.2 from the revised prior reading of 50.7. The number was below economists’ expectations of a 51.2 print. A number above 50 points to an expansion, below 50 to a contraction. The number signals the first fall below the critical no-change mark of 50.0 for the first time since March 2013.

Looking into the report, Markit remarked that the headline index was dragged lower by soft trends in production and new orders and declines in both employment and stocks of purchases. Interestingly, Markit said that there were a few reports that uncertainties regarding the energy industry, retail sector and the upcoming EU referendum had led some clients to delay spending. With that being said, deflationary pressures continued to ease in April, with the report saying there is now greater pressure on the service sector to sustain GDP growth.

The British Pound has been trading higher versus the US Dollar in the European session, but it seems that the figure coming below expectations was sufficient to cap further gains, and the Sterling dropped versus other majors on the news.

Daily FX Currency Analyst James Stanley Identified 1.4572 as a key supprt level for GBP/USD.

The DailyFX Speculative Sentiment Index (SSI) is showing a reading of about -1.14 at the time of writing, meaning that for every trader long the GBP/USD, there are 1.14 on the short side. The SSI is a contrarian indicator, implying further GBP/USD strength.

You can find more info about the DailyFX SSI indicator here.

GBP/USD 5 Minute Chart: May 3, 2016

--- Written by Oded Shimoni, DailyFX Research