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Sterling Edges Lower Following Mixed UK Data
Sterling was able to hold support levels on Monday despite momentum turning negative despite UK PMI manufacturing coming in above expectations. UK lending data experienced a climb, but the results was slightly worse than expectations. Housing prices on the other hand declined in January which could take the pressure off the Bank of England to raise rates.
UK Markit manufacturing PMI came in above expectations at a seven-month high of 54.1 in February from 53.0 in January. The data reaffirms the January picture of re-expansion after a period of de-acceleration during the latter part of 2014. The breakdown showed a decline in export orders, which likely reflects the impact of sterling’s recent appreciation against the euro to seven-year highs. Factory gate prices fell at the fastest pace since September 2009.
BoE UK lending data saw mortgage lending climb to 60.8k from 60.3k, though this was slightly less than markets were expecting. The dip on approvals may reflect the upcoming general election on May 7, as it’s too close to call and the main parties have different policies that could potentially impact the property market.
UK February Nationwide house prices declined 0.1% on the month and the year over year change fell to +5.7% from 6.8% in January. House prices have been trending lower since mid-2014. The implementation of stricter lending criteria in 2014, BoE raising of reserve requirements at lenders, and priced-out would-be first time buyers have collectively been driving disinflation in property prices. An additional negative is the upcoming general election on May 7 is affecting the market as its too close to call and the main parties have different policies that could potentially impact the property market.
The GBP/USD slid below the 10-day moving average as momentum is poised to turn negative. This occurs when the MACD (moving average convergence divergence) index generates a sell signal. The RSI has moved lower with price action reflecting accelerating negative momentum.
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