The British currency managed to post rather significant gains on Tuesday, having declined notable only against the Aussie. The RBA's decision to leave its cash rate unchanged at 1.75% provided the Aussie with sufficient strength to outperform the Sterling, with the GBP/AUD edging 0.53% lower. The only other decline was seen against the Kiwi, which accounted for 0.10%, while against the third commodity currency, namely the Loonie, the Pound barely managed to add any value, having surged 0.06%. Relatively significant gains were registered against the Yen (0.54%), the Euro (0.67%) and even versus the US Dollar (0.71%).
The United Kingdom May services purchasing managers' index rose more than expected, rebounding from a three-year low in April, which signalled increasing optimism over the health of the British economy. A report of market research group Markit showed that the situation with UK services PMI was more upbeat than expected with 53.5 points growth from 52.3 in April, while economists had forecast a score of 52.5. Activity has risen every month since January 2013 and the latest rate of growth was the slowed seen over the past three years. Services make up for almost 80% of the total gross domestic product, data showed, and this were the good news from the biggest sector in the UK despite the upcoming EU Referendum. Moreover, data remained well above the 50-point mark, indicating an expanding economy. Expectations for activity over the next 12 months strengthened despite the slowest gain in new business in the current 41-month sequence, and were contingent on the outcome of the June 23 EU membership referendum.
Nevertheless, despite the better-than-expected PMI figure, research group Markit has warned markets of a possible surprise following the June 23 Brexit referendum on the UK's membership in the European Union. Markit also highlighted that it was the slowest gain in new business in the 41-month growth sequence and that hiring was at a 33-month low.
UK Manufacturing and Industrial Production, and the NIESR GDP Estimate
GBP/USD muted during early trade
With another substantial jump, the Cable was able to retake the 1.45 major level yesterday and even climb over the tough resistance around 1.4535. The same cluster now acts as the nearest support, but a lot weaker than the ascending channel's support line, which is located at 1.4421, also remaining bolstered by the 55-day SMA. Even though the medium-term bias is bullish, the Sterling could still weaken and put the trend-line to another test. Demand, represented by the immediate support cluster might also be sufficient to cause the GBP/USD currency pair to prolong its recovery, allowing it to climb at least 50 pips, until the 1.46 level is reached.
Daily chart
Hourly chart
Bulls and bears remain in balance
Bulls grew stronger over the day, as 58% of traders are now long the Pound (previously 54%). The share of sell orders slid from 55 to 51%.
Compared to Tuesday, there are also slightly less bulls at OANDA - they take up 58% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is even closer to being neutral, but here the number of bulls exceeds the number of bears by only two percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (56%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (15%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost either between 1.44 and 1.46, or between 1.48 and 1.50 or even between 1.52 and 1.54 dollars in three months, all three chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 08 is 1.461.