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Cable edges lower after BOE, industry data

H.S. Borji
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The British pound edged lower Monday amid signs the UK housing sector was losing momentum. Industry data, meanwhile, pointed to sustained growth in the UK manufacturing sector, despite a slight dip in the headline PMI indicator.

The GBPUSD was trading at 1.6747, declining 0.12 percent. The pair fell to an intraday low of 1.6728. Initial support is likely found at 1.6720 and resistance at 1.6785.

The EURGBP was steady at 0.8129. Initial support is likely found at 0.8124 and resistance at 0.8146.

In economic data, UK mortgage approvals fell for a third consecutive month, as stricter lending terms appear to have slowed the pace of housing activity. Mortgage approvals declined to 62,918 in April, a nine-month low, the Bank of England reported today. Market analysts forecast a decline to 64,750.

Mortgage approvals have declined 17 percent since the January peak of nearly 76,000.

The average price of a UK home in March was £252,000, an 8 percent increase over the previous 12-month period.

Net lending to individuals rose less than expected in April, the BOE reported today. Net lending increased by £2.4 billion, compared to £2.8 billion the prior month. Market analysts called for a gain of £2.7 billion.

Net consumer credit, including personal loans and credit card lending, increased by £0.666 billion, compared to £1.028 billion the prior month.

In a separate report, Markit Group said the UK manufacturing industry expanded sharply in May, as growth in output and new orders kept jobs creation elevated. The headline PMI reading dipped slightly to 57.0, down from April’s five-month high of 57.3.

“British manufacturers march onwards to mirror last month’s strong performance,” said Markit chief economist David Noble in a press release. “Growth of new business and export orders remained strong in May, and firms are ramping up production to meet this demand.”

Markit economist Rob Dobson added, “Manufacturing production is currently expanding at a quarterly rate of close to 1.5 [percent].”

However, as manufacturing accounts for only ten percent of the UK economy, “these positive data are unlikely to shift the Bank of England’s MPC on the path of [normalizing] monetary policy on their own,” Dobson also stated.

The Chartered Institute of Purchasing & Supply and Markit will release construction PMI on Tuesday. Markit will also release UK services PMI on Wednesday.

Demand for the US dollar was limited on Monday, as investors continued to weigh Friday’s disappointing personal spending and consumer confidence data.. Cable’s losses were therefore contained ahead of US data.

Later on in the day the Commerce Department will report on construction spending for the month of April. Markit Group and the Institute for Supply Management will each report on US manufacturing PMI for the month of May.

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