Construction activity in the United Kingdom unexpectedly accelerated last month, according to a private survey published on Tuesday. According to Markit/CIPS, the Construction Purchasing Managers' Index for Britain advanced to 52.3 in September, entering the expansion territory. Back in July, the Construction PMI came in at 49.2 and analysts expected it to fall to 49.0 during September. Britain's construction activity unexpectedly contracted in June, declining to 46.0, its lowest level since June 2009, from May's 51.2 points amid the country's decision to leave the European Union. The Construction PMI data together with Monday's promising Manufacturing PMI showed signs of stabilization in the UK economy after the Brexit vote. New orders rebounded in September, after dropping for four straight months, while commercial construction activity fell for the fourth consecutive month, the longest negative stretch since 2013 although at a slower pace than previous months.
The British Pound was little changed on Tuesday despite the positive data. After the release it was trading at 0.8742 against the Euro, 1.2507 against the Swiss Franc, 1.2783 against the US Dollar and 130.82 against the Japanese.
UK Services PMI, US ADP Non-Farm Employment Change and US Services PMI
GBP/USD struggles to remain above 1.27
For the second day yesterday the British currency weakened significantly more than anticipated, completely breaching the post-Brexit consolidation trend, as even the support cluster around the July low of 1.2798 was unable to limit the losses. According to technical studies the Cable is to continue sliding down today, with the main target being the monthly S2 at 1.2585. On the other hand, a poor reading of US fundamentals today could cause the pair to undergo a correction, possibly even climbing back over the 1.28 level. The base case scenario, however, is another slump towards 1.2650.
Daily chart
Hourly chart
Traders remain undecided
There are 64% of all open positions being long today (previously 63%), whereas the number of orders to purchase the Sterling dropped down from 56 to 47%.
A different situation is observed elsewhere. For example, 73% of positions open at OANDA are currently long. This is more than the share of shorts (27%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 76% of traders being long and 24% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is around 1.30, the average forecast for January 05 is 1.3033. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 13% of the votes. Most of the votes are concentrated in 1.28-1.30 (22%) intervals. Furthermore, 53% all survey participants believe the Cable is to fall below 1.30.