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GBPUSD Falls to 4-Month Low After Weak UK Manufacturing PMI

GBPUSD Falls to 4-Month Low After Weak UK Manufacturing PMI

Justin McQueen, Strategist

GBPUSD Analysis and News

  • UK Manufacturing PMI falls to a 17-month low.
  • GBPUSD breaks below 1.3700 for the first time since January.

Underlying Weak UK Growth Reduces Rate Hike Expectations

UK Manufacturing PMI fell to a 17-month low in April at 53.9, dropping below expectations of 54.8, while the previous month had been revised lower to 54.9. In reaction to this underwhelming report, GBPUSD fell through the 1.3700 handle, reaching a low of 1.3682. Markit stated that “while adverse weather was partly to blame in February/March, there are no excuses for April’s disappointing performance” suggesting that the underlying factors within the UK economy are somewhat weak and thus further reducing the likelihood of a BoE hike.

Alongside this, the recent slew of weak economic data points, most notably last week’s Q1 GDP figure which rose at its slowest pace since 2012, has led to a rate hike by the Bank of England being virtually taken off the table, with OIS markets pricing in an 18% likelihood (Prev. 85%). Looking ahead, GBP traders will also focus on towards tomorrows Construction PMI, followed by the Services PMI on Thursday.

PRICE CHART 1: GBPUSD 1-MINUTE TIME FRAME (INTRADAY MAY 1, 2018)

Chart by IG

See how retail traders are positioning in GBPUSD as well as other major FX pairs on an intraday basis using the DailyFX speculative positioning data on the sentiment page.

For a more in-depth analysis on Sterling, check out the Q2 Forecast for GBP/USD

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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

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