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Sterling Rebounds Following Robust Services PMI Number

David Becker
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Sterling Rebounds Following Robust Services PMI Number

Sterling rebounded following the services PMI outcome, which rose to 59.1 in July, an eight-month high to indicate robust expansion in the sector. This, together with yesterday’s above-forecast construction PMI, has more than offset the disappointing manufacturing PMI, which sank to a one-year low, and lifted the composite PMI reading to a three-month peak.

Cable has logged a peak of 1.6888 so far, nearly a 40-pip gain on the session. EURGBP is also lower, while U.K yields have lifted. The data supports our bigger-picture bullish view on sterling, with expected U.K. growth of 3.2% this year likely to be quite a lot firmer than most other industrialized nations.

The U.K. Markit services PMI beat expectations in rising to 59.1 in July, an eight-month high after rising from 57.7 in the previous month and indicating robust expansion in the sector. The median forecast had been for a 58.0 outcome. The breakdown in Tuesday’s survey showed solid new orders and investment, though employment growth slowed slightly and confidence about the future ebbed to 71.2 from 72.3, its lowest level in eight months although still high by historic comparison.

The GBPUSD seems to have held short-term support near Monday and Friday’s lows at 1.6815. Resistance is seen near the 10-day moving average at 1.6927. Momentum is still negative with the MACD (moving average convergence divergence) index printing in negative territory but the trajectory of the index is flattening. The RSI (relative strength index) perked up and moved higher with price action coming from oversold territory which is a positive sign, and is currently printing at reading of 35, which is at the low end of the neutral range.

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