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Sterling Edges Higher Following Strong Construction PMI

David Becker
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www.iforex.com
Sterling Edges Higher Following Strong Construction PMI

Sterling has bounced slightly on Monday following 4-consecutive days of declines following the U.K. July Construction PMI that come in above forecasts and indicates continued robust expansion. The breakdown of the survey was encouraging, helping offset last week’s manufacturing PMI disappoint. Although the construction sector is small, at 7% of GDP, the multiplier effects are quite significant. Cable logged a high of 1.6834 before turning lower, to levels around 1.6820. EUR-GBP is at near net unchanged levels around 0.7980 after dipping to a low of 0.7974.

U.K. July construction PMI came in at 62.4, above forecasts but slightly below the 62.6 peak seen in June. The survey indicates continuing robust expansion, and is the 15th successive month of expansion. Job hiring accelerated at the fastest rate since at least April 1997, which is when the survey started. New orders also rose for a third consecutive month. The data helps offset last week’s manufacturing PMI disappoint. Sterling and U.K. yields perked up on the data, though follow through has been limited and sterling has already given back the gains it saw.

Momentum on the GBPUSD continues to create headwinds for the pound with the MACD (moving average convergence divergence) index printing in negative territory with a downward sloping trajectory. The index generated a sell signal in early July and is now printing at its lowest levels in the past 6-months. The RSI (relative strength index), which is a momentum oscillator that measures overbought and oversold levels, has curtailed its downward move and is printing a reading of 28, which is below the oversold trigger level of 30 and could foreshadow a correction.

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