The UK PMI manufacturing index expanded at the fastest pace in five months in June before results of the Brexit referendum which showed that biggest part of Britons voted to leave the European Union. According to the Markit research group report, the British manufacturing index advanced to a seasonally adjusted 52.1 mark during the last month from a reading of 50.1 in May. Moreover, analysts had expected and advance to 50.4. Nevertheless, the impact of the following announcement will be limited since the main attention brought on the post-referendum impact on the manufacturing sector. Although, there could be expectations of a strong downward tendency in domestic confidence, potentially offset by improved exports. However, confidence could strengthen if the index holds above 50.0 next month.
Meanwhile, the Brexit story is not over yet. It could be expected that there will be a long period of volatility around the decision as well as implementation of the UK parting ways with the EU. The Bank of England Governor Mark Carney highlighted the central bank would probably need to pump more stimulus into Britain's economy during the summer in order to cope with the shocking Brexit referendum results.
UK Construction PMI is the only event
GBP/USD risks falling below 1.32
Friday ended with the Cable remaining relatively unchanged, suffering a small loss, but unable to fall below the post-referendum low of 1.3230. Technically, the GBP/USD currency pair should now undergo a correction, at least partially erasing previous week's losses, thus, piercing the immediate resistance in face of the weekly PP; however, this might not be the case, since aggregate technical indicators are now giving bearish signals. As a result, the 1.3230 level risks being breached, with focus then shifting to the weekly S1 at 1.3090, the second closest support.
Daily chart
Hourly chart
Bulls remain in control
Bulls barely keep outnumbering the bears, as 56% of all open positions are now long (previously 60%). At the same time, the portion of orders to purchase the British Pound increased from 57 to 65%.
Compared to Monday, there are also slightly more bulls at OANDA - they take up 60% of the positions open with the Canada-based broker. Sentiment at Saxo Bank turned bullish, as here the number of bulls exceeds the number of bears by 16 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.42 in three months
More than half of traders (58%) believe the British currency is to cost 1.42 or less dollars after a three-month period. The most popular price intervals was selected by slightly less than a fifth (13%) of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Sterling is to cost between 1.40 and 1.42 dollars in three months, chosen by 12% of the surveyed. At the same time, the mean forecast for Oct 04 is 1.4106.