UK construction activity advanced at the fastest pace in nine months in December, supported by a rise in house building, a survey revealed on Wednesday. Markit/CIPS said its Construction PMI for Britain increased unexpectedly to 54.2 points during the reported period. This was its highest rate since March, while market analysts anticipated expected the Index to remain unchanged at the preceding month's reading of 52.8. The latest surveys for the construction and manufacturing industries suggest that the British economy gained momentum by the end of 20016.
However, the UK Services PMI for December, scheduled to be released on Thursday, is expected to paint a better picture of Britain's economy, as the services sector accounts for almost 80% of the economy. The survey also pointed to rising price pressures in the sector amid a steep fall in the valued of the British Pound. According to Markit, building costs jumped at their strongest pace since April 2011 last month, as well as numerous companies reported excess demand for materials. Even though the UK economy was among the best performing in the world last year, it is projected to grow just 1.1% in 2017 due to higher inflation. Back in December, house building grew at the fastest pace since January, and may get a boost going further if the government's plan to build 200,000 new homes achieves success.
US ADP Non-Farm Employment Change and Services PMI
GBP/USD remains on the back foot
The British Pound managed to outperform the American Dollar on Wednesday, not only climbing over the 1.23 mark, but also piercing the second resistance level. The Cable, however, keeps gravitating towards the 1.23 level for a few weeks now; therefore, another leg down is expected. Consequently, the Sterling is likely to slump back under 1.23, with focus shifting to the second support level once again, namely the weekly S1. Overall, the 1.22 major level is the main target, where the given pair could receive sufficient support for a rebound or breach it and continue moving towards 1.21, where a tough demand area is located. Technical studies are unable to confirm this scenario.
Daily chart
Hourly chart
Traders mostly bullish
Today 61% of traders are bulls, compared to 64% yesterday. At the same time, the share of buy orders dropped down from 62 to 47%.
A similar situation is observed elsewhere. For example, 64% of positions open at OANDA are currently long. This is more than the share of shorts (36%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 62% of traders being long and 38% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.24 major level, as 65% of survey participants believe so. While the current price is around 1.23, the average forecast for April 05 is 1.2292. However, the 1.18-1.20 interval is now the most popular one, having 17% of the votes, while on the second place is the 1.20-1.22 price range, with 15% of poll participants choosing it. Furthermore, the 1.22-1.24 interval was chosen by 13% of the voters.