UK construction industry grew at its fastest pace in six months in October despite the post-Brexit uncertainty, official data revealed on Wednesday. Markit/CIPS said its Construction Purchasing Managers' Index for Britain jumped unexpectedly to 52.6 points last month, up from September's 52.3 points, while market analysts anticipated a slight deceleration to 51.9 in October. Any reading above the 50 point-level indicates an expansion in the construction sector. Overall, even though these numbers were better than expected, the outlook for the British construction sector remains weak amid declining new orders and rising costs. Back in June, the Construction PMI slipped into contractionary territory following the UK's vote to leave the European Union, falling to 46.0 from May's 51.2 points, the lowest level since the global financial crisis.
The weak Sterling is expected to force the Bank of England to revise upwards its inflation forecasts during the November policy meeting on Thursday, but it is not expected to cut interest rates further. After the release, the British Pound rose slightly against other major currencies, trading at 1.12263 against the US Dollar, 127.07 against the Japanese Yen and 0.9036 against the Euro by on the London Stock Exchange.
UK Fundamentals to drive the Cable today
GBP/USD attempts to climb over 1.24
Wednesday ended with the Cable easily climbing over the 1.2250 level, thus, breaching the shorter period consolidation trend. Another bullish development today would imply a breach of the longer period consolidation, with the key resistance being the area around 1.2380, formed by the weekly R2, the monthly PP and the Bollinger band. Once this resistance is pierced, the British currency could partially negate its October losses ahead of the US election results. However, downside risks are also present, as the key resistance is reinforced by a seven-month down-trend. Furthermore, technical indicators are also in favour of a bearish development today.
Daily chart
Hourly chart
Traders mostly bullish
Today 63% of traders hold long positions (previously 66%), while the share of sell orders edged down from 59 to 58%.
A similar situation is observed elsewhere. For example, 61% of positions open at OANDA are currently long. This is more than the share of shorts (39%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 60% of traders being long and 40% 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 higher than the level where it is now. While the current price is around 1.22, the average forecast for November 03 is 1.2226. Furthermore, the 1.18-1.20 interval is now the most popular one, having 21% of the votes. On the second place in terms of the votes are the 1.16-1.18 (13%) and the 1.20-1.22 (13%) intervals, followed also by the 1.32-1.34 with only 9% of the votes. Moreover, 71% all survey participants believe the Cable is to fall under 1.26.