A disappointing read from Britain’s manufacturing sector: a score of 56.3 in the manufacturing PMI reflects a slowdown that is not minor: nearly two points. Nevertheless, it holds a safe distance from the 50-point threshold that separates expansion from contraction.
GBP/USD was struggling to hold its gains above 1.3550 and is now slipping back down. Has the rally come to a halt? Or is this only a temporary glitch? Update: after the initial dip, pound/dollar is moving up once again, topping 1.3560.
Markit’s purchasing managers’ index for the manufacturing sector was expected to tick down from 58.2 to 58 points in December. These are very upbeat levels, representing robust growth. The British manufacturing sector has enjoyed the weakness of the pound: exports are more attractive. However, the wider UK economy has underperformed in 2017, mostly due to Brexit uncertainty.
GBP/USD has been moving higher ahead of the publication, driven by the sell-off of the US dollar. Cable traded at around 1.3560, just above resistance at 1.3550. Further resistance awaits at 1.3615. Support is at 1.3450.
This is the first out of three PMIs. Tomorrow we will get the construction PMI and Thursday will see the most important release: services PMI.
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