British manufacturing activity hit its best since 2014 last month, supported by a solid global economic recovery and the weak Pound. Markit/CIPS reported on Tuesday that its Purchasing Managers' Index for the British manufacturing sector came in at 57.3 in April, following the preceding month's 54.2 and surpassing analysts' expectations for a decline to 54.0. Tuesday's data is set to provide an additional support to the current British Prime Minister Theresa May ahead of the June 8 National Election. According to the data, British manufacturers enjoyed the recent positive performance of the global economy and the cheaper Sterling, which boosted export growth. However, back in March, the Bank of England Deputy Governor Ben Broadbent said that a rebound in the performance of the UK manufacturing sector might vanish soon and the future performance of the sector would solely depend on the outcome of Brexit negotiations.
Moreover, some analysts claim that manufacturers will stop benefiting from the weak currency soon. Nevertheless, Tuesday's data is set to please the Central bank, which is due to meet next week. After the release, the British Pound hit its seven-month high against the US Dollar but failed to sustain its gains.
US ADP Non-Farm Employment Change and FOMC Statement
GBP/USD expected to return under 1.29
The British Pound surprised with its performance on Tuesday, being that it outperformed the US Dollar and reclaimed the 1.29 level. Technical indicators today keep giving positive signals, suggesting the Sterling is to edge higher against the Buck for another day. Such an outcome is possible, but in this case gains are likely to be capped around 1.3020, with the broadening rising wedge's upper border and the weekly R1 representing resistance there. On the other hand, upbeat US fundamentals could boost the Greenback, which would cause the Cable to fall even under the second support, namely the weekly S1.
Daily chart
Hourly chart
Traders are equally divided
There are 52% of traders holding short positions today (previously 51%), whereas 67% of all pending orders are to acquire the Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 61% of all open positions are short and the remaining 39% are long. Meanwhile, sentiment at Saxo Bank worsened again over the day, with 57% of traders now being short and the other 43% being long the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
By the end of the next three months traders believe the Cable is to rise above the 1.28 major level, as 63% of survey participants believe so. While the current price is around 1.29, the average forecast for August 03 is 1.2890. The 1.30-1.32 range is now the most popular price interval, having 15% of the votes each, while on the second place is the 1.28-1.30, with 14% of poll participants choosing it. Furthermore, the 1.32-1.34 and the 1.34-1.36 intervals were selected by 12% of the voters.