Manufacturing production resumed to demonstrate downward tendency after two months of the UK's Brexit vote. According to the Office for National Statistics, manufacturing production went down 0.9% in July compared to the month before, influenced by a strong decline in pharmaceutical output. Moreover, economists had expected a fall of 0.3% in July, while the decrease recorded in the previous month was revised up from 0.3% to 0.2%. On an annual pace, production expended 0.8% in July, compared to a downwardly revised 0.6% increase in the previous month and analysts' expectations for a 1.7% gain. On a yearly period, manufacturing production went up 0.8% in July, worse than forecasts for a 1.7% increase.
In the meantime, the weak manufacturing figures challenge an emerging question "What Brexit?" that had been supported by positive consumer and business sentiment data. Moreover, the ONS report releases one of the first post-Brexit-vote reports on actual activity and may revive hopes of additional Bank of England stimulus package after the bank cut its benchmark rate by a quarter point to 0.25% in August.
No UK events, but activity to remain high
GBP/USD returns to 1.3320
GBP/USD bounced off of the upper boundary of the emerging ascending channel yesterday, but there is not a lot of room for the sell-off to extend. The immediate support is at 1.3320 (23.6% Fibo), while the recently broken trendline is at 1.3275. Additional demand area is seen near 1.32, where the lower bound of the channel merges with the 55-day SMA, but it is unlikely to be tested before an attack on 1.3500/1.3480. Within this area supply is represented by the July high and resistance trendline.
Daily chart
Hourly chart
SWFX sentiment is bearish; elsewhere gap is insignificant
SWFX sentiment remains perfectly unchanged—there is a 24 percentage point difference between the shares of longs and shorts just like five days ago. Meanwhile, the portion of sell orders increased from 58 to 60%.
At Saxo Bank, however, the sentiment has somewhat improved since the last report, as the share of longs increased to 44 from 41%. The gap between the bulls and bears is even narrower at OANDA, where 47% of positions are long and 53% are short, with no change from the yesterday's figures.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees the GBP/USD below 1.30 in three months
Slightly more than half of traders (52%) believe the British currency is to cost 1.30 or less dollars after a three-month period. The most popular price intervals, however, were the 1.26-1.28, 1.34-1.36 and the 1.36-1.38 ones, all three selected by 13% of the voters. The second most popular choice implies that the Sterling is to cost either between 1.28 and 1.30 dollars or between 1.38 and 1.40 dollars in three months, both chosen by 11% of the surveyed. At the same time, the mean forecast for Dec 02 is 1.3064.