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.
Fundamentals to take a back seat
GBP/USD finds support at 1.33
The Sterling stabilised yesterday between the 23.60% retracement of the post-Brexit-vote sell-off and the falling trendline that was broken during the second half of the previous week. Considering that the pair is trading in a bullish channel, and it has just confirmed the upper bound of the pattern, we may expect an extension of the latest decline down to 1.3190/70, where we have the lower bound of the channel together with the 55-day SMA. However, taking into account technical indicators, a rally from 1.33 seems more likely for now.
Daily chart
Hourly chart
Bulls are closing the gap
After a period of relative stability the sentiment noticeably improved yesterday. Bears remain in majority, but the share of longs jumped from 38 to 43%. At the same time, 43% of pending orders are to buy and 57% are to sell the Pound.
Sentiment among the clients of other brokers is somewhat more balanced. At the moment, 46% of OANDA traders are long the Sterling, which is only one percentage point lower than yesterday. The portion of bulls at Saxo Bank, however, increased to 47 from 44% recorded 24 hours ago, revealing that the market is becoming less pessimistic with respect to the Pound.
Spreads (avg, pip) / Trading volume / Volatility
Traders' forecasts remain stable
Traders have not materially changed their view on GBP/USD since the beginning of July, with the average forecast fluctuating slightly in the range between 1.32 and 1.30 dollars. However, the actual percentage of people who voted for this interval is only 5%, and merely 11% of traders voted for the 1.30-1.34 interval, where the currency pair has been trading since the beginning of July. The most popular answer choice was the 1.36-1.38 interval, which was chosen in 15% of cases. At the same time, 43% of traders expect the Cable to be above 1.34 and 47% of traders expect the rate to be below 1.30 in three months.