British manufacturing and industrial production rose less than expected in April but broke, following three consecutive months of declines. The Office for National Statistics reported on Friday that manufacturing production climbed 0.2% on a seasonally adjusted basis in April, falling behind expectations for a 0.8% rebound and following the preceding month's drop of 0.6%. On a yearly basis, manufacturing production remained unchanged in the reported month, after climbing 2.2% in March. Friday's report also showed that industrial production in Britain advanced 0.2% month-over-month in April, compared to the previous month's fall of 0.5%, although analysts anticipated an increase of 0.7%.
On an annual basis, industrial production declined 0.8% during the reported month, following the preceding month's climb of 1.4%. Other report released by the ONS on Friday showed that the country's goods trade gap narrowed to £10.4B in April, whereas the prior month's trade deficit of £13.4B was revised down to £12.0B. The narrowing of the gap was driven mainly by lower imports that dropped more than 5% in April.
UK inflation data vs. US PPI
GBP/USD exposed to more weakness
The GBP/USD currency pair experienced more weakness on Monday, causing the exchange rate to drop below the 1.27 handle. As a result, the monthly S2 at 1.2624 has become the main support now, which should limit any bearish reactions today. Another leg down is the most likely outcome, as technical indicators are giving distinctly bearish signals now. A breach of the monthly S2 is to open the door for the 1.25 mark to be reached by week's end, which would be a two-month low for the Cable. Despite the recent bearish developments, the Pound is still expected to eventually reach the 1.32 zone, where the three-year down-trend is located. Once this situation occurs, that is to be the key point on the Cable's future.
Hourly chart
Daily chart
Traders remain neutral
Market sentiment remains somewhat bullish, as 59% of all open positions are still long. At the same time, there are 63% of all pending orders set to sell the British Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 52% of all open positions are short and the remaining 48% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 56% of traders now being short and the other 44% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
Traders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 53% of survey participants share this belief. While the current price is around 1.27, the average forecast for September 13 is 1.2837. The 1.34-1.36 range is still the most popular price interval, having 22% of the votes, while on the second place is the 1.20-1.22 interval, with 17% of the voters choosing it.