Sterling Hits 3-week Low Following Disappointing PMI Data


Sterling dropped sharply following the UK PMI miss out the UK. Cable shed nearly 40 pips in making a post-data low of 1.5223, which is the lowest traded since May 7. EUR-GBP also moved higher on the back of the data release reflecting broad sterling weakness. Support on the currency pair is seen near the 50-day moving average at 1.5157.

The EU membership debate has created uncertainties for long-term investors, while there has been some relatively disappointing data out of the UK over the last week, with the Gfk consumer confidence for May diving to +1 from April’s +4, and the second estimate of UK Q1 GDP was left unrevised at 0.1% quarter over quarter and 2.4% year over year, contrary to expectations for a one basis point revision on both counts.

Expectations of a rate rise in the UK at the beginning of 2016 are now being pushed back. Monday’s UK Markit manufacturing PMI disappointed at 52.0 in the May reading, slightly up from April’s 51.8, which is a six-month low-water mark, but well off our survey median forecast of 52.9. The PMI report showed that strong domestic demand is being offset by weak export performance, which has largely been a consequence of sterling’s strength against the euro. Hiring in the sector was at its slowest in two years, though this month’s reading still makes it the 26th consecutive month of expansion in the sector.

Looking forward the BoE lending data for April which is scheduled for Tuesday should show stronger mortgage approvals figure, of 62.7k after 61.3k in March. Unsecured consumer lending is anticipated at GBP 1.1 billion, which would be slightly off the figure for March but still near the highest level since before the financial crisis of 2008.

The post Sterling Hits 3-week Low Following Disappointing PMI Data appeared first on Forex Circles.

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