Strong Services PMI Growth Fail To Lift Pound

Strong Services PMI Growth Fail To Lift Pound
March 6, 2019

 

The Sterling pound declined yesterday against the greenback despite the report of a bullish economic data related to the UK. The GBP/USD currency pair was mainly weighed down by the upcoming Brexit deadline, which is just 23 days away, with little signs of a deal within the stipulated time frame. The downtrend was further aided by the release of strong ISM non-manufacturing PMI data from the US. From a high of 1.3198 recorded in the early European session, the GBP/USD pair fell to a low of 1.3098 in the US session before reversing to 1.3130 levels.

 

Pound struggles to maintain ground despite positive economic data

Yesterday, during the Asian session, the currency pair declined slightly before rallying to hit its daily high in the early European session. The release of strong Markit/CIPS UK services PMI in the London session sparked the currency pair’s initial rally as the figures came in at 51.3, which was reasonably higher than the anticipated 50.0 figure, reflecting upbeat services growth in spite of the Brexit uncertainty. In the previous month, the UK services PMI reading came in at 51.

A reading above 50 indicates expansion and vice-versa. The data suggests that the economy is on course to expand by 0.1% in the first-quarter of 2019. The UK regulators recently entered into contracts with the European Securities and Markets Authority (ESMA), under the guidance of the Bank of England (BoE) and the Financial Conduct Authority (FCA), to guarantee the unhindered continuation of the UK financial services in case of an abrupt exit by the UK from the EU without any deal in place. As the protection is now in place, the economy is expected to expand in the first-quarter of 2019 despite the Brexit uncertainty.

The GBP/USD pair, however, was unable to maintain the uptrend in the US session as traders resorted to book profit or exit their positions after the release of an upbeat ISM non-manufacturing PMI data. The Institute of Supply Management reported non-manufacturing PMI of 59.7, up from 56.7 in the previous month and better than economists’ expectation of 57.4.

Another report indicated that the sales of new US single-family homes recorded a seven-month high in December, but November’s strong numbers were revised lower.

The Commerce Department revealed that new home sales grew 3.7% to a seasonally adjusted annual rate of 621,000 units. It is the highest recorded level since May 2018. However, November’s sales figures were downwardly revised to 599,000 units from the previously reported 657,000 units.

Economists polled by Reuters had estimated new home sales of 600,000 units in December. New home sales account for roughly 11.2% of overall housing market sales. The future performance of the pound will probably be affected by Brexit related developments as there are no high impact, UK related economic data releases for the rest of the week. The pound is expected to remain weak against the greenback in the next few days due to reasons given above.

Technically, the GBP/USD pair is declining after facing resistance at 1.3190. The currency pair is also moving along the descending channel as shown in the image below. The next major support for the currency pair is at 1.3025. Additionally, the moving average of oscillator also has a negative reading. As a result, we can expect the currency pair to remain in a downtrend in the short-term.

gbp - technical analysis - 6th March 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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