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EUR/GBP Shrugs Off UK Services Data and Waits for the ECB

EUR/GBP Shrugs Off UK Services Data and Waits for the ECB

Nick Cawley, Strategist

Talking Points

- UK services miss after last week’s manufacturing beat.

- All eyes on the ECB – will it offer any hint towards monetary tightening?

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The dominant UK services sector missed market expectations, according to the latest Purchasing Managers’ report. The sector, which accounts for around 80% of UK GDP, according to figures from the Office for National Statistics, fell to 53.2 against expectations of 53.5 and July’s 53.8.

EURGBP moved a fraction higher in the wake of the release but trading is expected to remain fairly muted ahead of this Thursday’s ECB policy meeting. Expectations have been growing in recent weeks that ECB President Mario Draghi may outline a ‘quantitative tightening’ timetable, although the recent strength of the single currency may stay his hand.

DailyFX analyst Martin Essex will be covering the ECB announcement live on Thursday – you can sign up for free and join him here.

Last week the UK manufacturing PMI beat expectations, rising to 56.9 against a prior month’s 55.3 and expectations of a fall to 55.

Chart: EURGBP Three Minute Timeframe (September 05, 2017)

Chart by IG

Retail trader data show 24.7% of traders are net-long with the ratio of traders short to long at 3.05 to 1. In fact, traders have remained net-short since May 16 when EURGBP traded near 0.84323; price has moved 9.0% higher since then. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURGBP prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURGBP-bullish contrarian trading bias

For the latest IG Client Sentiment indicators, click here

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

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

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