In January, British total production experienced a 0.4% decrease compared to the previous month, the Office for National Statistics revealed on Friday. This number was mostly attributed to declines in the water and manufacturing sectors, where production fell 0.7% and 0.9%, accordingly. The largest contribution to January's fall came from pharmaceutical products that posted a 13.5% drop, following growth of 8.2% in the previous month. However, this kind of change is not unusual for the pharmaceutical industry, as it can be highly volatile due to the timing of contracts. To certain extent, it was counterbalanced by production of transport equipment that increased 2.6% and reached the highest level since April 2016. This growth was supported by a 2.4% gain posted by the wood, paper and printing industry and a 2.3% increase posted by the textile, chemicals and machinery industries.
Nevertheless, the largest month-to-month growth was seen in the other mining and quarrying sector, where production advanced 3.6%. Yet, this figure only partially allowed to offset a 8.6% drop in the coal and lignite sector. On an annual basis, the British Production Index increased 3.2% in January. Growth was seen in all four major sectors but the biggest contribution of 2.7% came from manufacturing.
US PPI and Core PPI are due on Tuesday
GBP/USD regains bullish momentum
Even though the US NFP data came out strong on Friday, the earnings growth still disappointed, bringing doubts over a March rate hike, thus, turning the tide on the Greenback's rally. As a result, the Cable traded flat that day, but began edging higher today amid a corrective decline in the US Treasury bond yields. Consequently, the GBP/USD pair now has the potential to reclaim the 1.22 major level, where the weekly pivot point is the nearest resistance. The 1.2250 is the next target, but is likely to remain out of reach, as the monthly S1 and the weekly R1 form another strong supply area there.
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Hourly chart
Traders mostly bullish
Bulls grew stronger over the weekend, as now 69% of all open positions are long, compared to 67% on Friday. At the same time, the portion of purchase orders barely changed, having risen from 53 to 54%.
A slightly more optimistic situation is observed elsewhere. For example, 72% of positions open at OANDA are currently long. This is more than the share of shorts (28%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 70% of traders now being long and the other 30% 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 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.22, the average forecast for June 13 is 1.2369. The 1.18-1.20, the 1.20-1.22 and the 1.28-1.30 ranges are now the most popular price intervals, with all three having 15% of the votes each, while on the second place are 1.16-1.18 and 1.30-1.32 price ranges, both with 12% of poll participants choosing them. Furthermore, the 1.14-1.16 and the 1.32-1.34 intervals were each chosen by 10% of the voters.