Regardless of the positive UK fundamentals released yesterday, the Sterling keeps ceding ground against the background of rising support of 'Brexit' among UK citizens. The British currency plunged as much as 1.5% against the broadly strengthening Japanese Yen, while the Pound's smallest decline was recorded against the US Dollar - minus 0.46%.
Industry data showed that manufacturing activity in the United Kingdom narrowly expanded in May, slightly beating analysts' expectations for it to remain in contraction for a second month. In a report, market research group Markit stated that UK manufacturing PMI increased to a seasonally adjusted 50.1 last month from a reading of 49.4 in April, which had been the first contraction in three years and was revised up from an initial figure of 49.2, while analysts forecasted the index to advance to 49.6 in May.
Nevertheless, the general data still suggests there is an overall lack of confidence with manufacturing still under pressure and the sector will again be a net drag on the economy for the second quarter. Production volumes were broadly unchanged in the latest survey month, as the growth rate of new order inflows remained subdued, albeit slightly quicker than in April. Moreover, there was a negative impact from uncertainty with many companies suggesting that the EU referendum was having a detrimental impact on business. There was notable weakness in the investment-goods sector and strong job cuts in this sector. Overall employment also declined for the fifth successive month, although the pace of decline did slow. The index overall suggests that manufacturing will contract more than 0.5% for the second quarter and will undermine overall GDP data with the economy remaining dependent on the services sector.
UK construction PMI to stay unchanged; mixed data expected from the US
GBP/USD closes in on 1.43
GBP/USD moved even closer towards 1.4340/1.4290 yesterday, and a test of this demand area, created by the 100-day SMA, up-trend and monthly S1, will be a strong bullish sign for June. Meanwhile, the immediate support is at 1.44, implied by the 55-day SMA, and it is seen as able to push the price back towards the weekly S1. As for the longer-term perspective, also considering the monthly technical indicators, the Cable should bounce off of 1.48 and thus resume its descent from 1.72 dollars started back in the third quarter of 2014.
Daily chart
Hourly chart
SWFX: 53% of positions are long
The gap between the bulls and bears remains insignificant, merely six percentage points. A similar situation is observed with the orders set closest to the spot—51% of them are to buy and 49% are to sell the Sterling.
OANDA and Saxo Bank traders share the same undecided sentiment with respect to the Sterling. The Canada-based broker reported that 55% of its traders are long the Cable. Similarly, 53% of the Denmark-based are long the same pair, up from 45% reported 24 hours ago.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months