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GBPUSD Sees Limited Reaction as UK Manufacturing PMI Rebounds From 17-Month Low

GBPUSD Sees Limited Reaction as UK Manufacturing PMI Rebounds From 17-Month Low

Justin McQueen, Strategist

GBPUSD Analysis and News

  • UK Manufacturing PMI sees modest lift from 17-month lows, however underlying concerns remain.
  • GBPUSD remains south of 1.33, GBP traders look for next week’s Construction and Services PMI

Mild Uptick Masks Underlying Concerns

UK Manufacturing PMI pointed to a limited pick up to 54.4 in May from 17-month lows of 53.9, which also beat expectations of 53.5. In reaction to the PMI report, a limited reaction had been seen in GBPUSD given that modest rise has come from already subdued levels, as such, the pair remain south of the 1.33 handle. Markit stated that mild output growth acceleration masks underlying weakness with slower expansion of new work received, while supply chain constraints and cost pressures intensify.

Following the better than expected figure, BoE rate hike expectations rose albeit very slightly. An August rate hike is still seen at a rather low 32% with encouraging data needed in order for the BoE to strongly consider a summer rate rise. Looking ahead, GBP traders will have on eye on Construction and Services PMI figures at the front end of next week.

GBPUSD PRICE CHART: 1-HOUR TIME FRAME (May 2018-June 2018)

GBPUSD Sees Limited Reaction as UK Manufacturing PMI Rebounds From 17-Month Low

Chart by IG

A cluster of DMAs (20,55,100) keeping GBPUSD static for the time being, which continues to trade south of 1.33. Resistance ahead is seen at the 200DMA situated at 1.3332, while Thursday at 1.3348 could also cap further gains. GBP bears continue to remain in control, looking for a downside target of 1.3152, marking the 76.4% Fibonacci Retracement of the 1.2774-1.4377 rise.

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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