The British Pound was unable to post significant gains against other major currencies, due to a poor reading of the UK Construction PMI data. Nevertheless, the Sterling managed to add 0.87% against the Canadian Dollar, amid the Canadian Trade Balance figures disappointing yesterday. Mild gains of 0.22%, 0.11% and 0.10% were registered versus the Kiwi, the Aussie and the Japanese Yen, respectively. Meanwhile, the Pound remained relatively unchanged against the Swiss Franc, up only 0.06%, followed by a 0.18% loss against the Euro and 0.27% versus the American Dollar.
The UK's construction output rose at the slowest pace in nearly three years in April, suggesting the economy was losing steam before June's referendum on whether to leave the European Union. The Markit/CIPS PMI gauge of business activity within Britain's construction sector fell to 52 last month from 54.2 in March, and considerably below economists' median forecast of 54.Even though the headline PMI figure remained above the key 50-mark threshold for the 36th straight month in April, its level has weakened notably from post-crisis highs seen in 2014. Both business activity and new work declined in April, and subdued demand conditions led to employment levels also falling to a three-year low.
Britain's economy slowed in the first quarter as the global economy weakened. Recent data have suggested it is losing more steam as the June 23 EU vote looms. The UK manufacturing sector encountered a surprise contraction in April that reflected in the PMI, as it entered negative territory for the first time in four years, plummeting under the 50 point mark to show 49.2 points. Market participants will now be closely watching the PMI survey on the services sector due later in the day, which is expected to show that activity declined slightly to 53.5 at the beginning of the second quarter, following a dramatic decrease to a three-year low overall in the first quarter of this year.
UK Services PMI and US Initial Jobless Claims
GBP/USD on the edge of falling under 1.45
Despite a weak reading of the US ADP Non-Farm Employment Change yesterday, the Cable still edged lower, but managed to close on top of the 1.45 major level. The Sterling is now likely to rebound, with the nearest resistance located at 1.4563, represented by the weekly PP. Even though technical indicators are bolstering the possibility of the positive outcome, risks of the GBP/USD currency pair inching lower persist if the UK's services sector data disappoints today. In case the bearish development prevails, the nearest area to prevent the Pound from falling lower will be the cluster around 1.4450.
Daily chart
Hourly chart
Bulls now in the majority
Bulls grew stronger today, as 58% of all open positions are now long (previously 54%). At the same time, the portion of orders to acquire the British currency barely changed, now taking up 48% of the market.
At OANDA market sentiment no longer remains in a perfect equilibrium, as 52%% of their open positions are short. Meanwhile, the sentiment at SAXO Bank also edged closer to equilibrium, with 53% of their traders holding short positions (previously 51%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months