Market Analysis

String of weaker UK data points sends sterling lower

The British pound is coming under pressure for a fourth consecutive trading day against the U.S Dollar, after the UK services sector, PMI narrowly missed falling into contraction last month. Sterling moved closer to its current 2019 trading low, at 1.2505, following the much softer than expected PMI services reading. The UK services sector accounts for over eighty percent of the United Kingdom economy and contributes greatly to the nations gross domestic product.

Sterling had already found itself under downside pressure before the UK services PMI release, following bearish comments from Bank of England Governor Mark Carney. Governor Carney said that the United Kingdom economy may need monetary support to cope with the growing risks coming from the Sino-U.S trade war and Brexit.

Carney’s comments appeared to suggest to investors that the Bank of England could be considering policy easing measures, prompting investors to increase bearish bets towards the British pound. The news also caught traders off-guard, as MPC members had struck a balanced tone at the last policy meeting in June.

Economic data from the UK economy this week has highlighted that the UK economy is extremely fragile, with the UK manufacturing PMI contracting in June. The UK construction PMI was much worse than expected on Tuesday, with a dismal 43.00 reading, marking the steepest contraction in the UK construction industry since April 2009.

The downturn in UK data point has largely been blamed on the supply chain disruption caused by Brexit and the end of front-loading orders. The United Kingdom’s GDP number for the second fiscal quarter of this year may show that the economy contracted during the period of April through to June, raising fears of a possible recession.


 GBP/USD Mountain Chart | Source: ActivTrader

GBP/USD Mountain Chart | Source: ActivTrader


The British pound is technically weak while trading below the 1.2666 level against the U.S Dollar, placing short and medium-term sellers firmly in charge at the moment. Key bearish targets are located at the 1.2505 and 1.2470 levels. Bulls now need to move price above the 1.2610 resistance level to alleviate near-term bearish pressure on the GBP/USD pair.


Written by Nathan Batchelor, External Analyst, ActivTrades

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