Pound higher as Services PMI rises, job report next
|The British pound has moved higher on Monday, after declining 1% last week. In the European session, GBP/USD is trading at 1.2747, up 0.30% on the day.
UK Services improves, Manufacturing slips
The UK Services PMI rose to 51.4 in December, up from 50.8 in November, which was a 13-month low. This beat the market estimate of 51.0, but points to weak business activity as demand for UK exports has been weak and confidence among services providers remains subdued.
UK manufacturing is mired in a depression, and the PMI fell to 47.3 in December, down from 48.0 in November and shy of the market estimate of 48.2. This marked the lowest level in eleven months, as production and new orders showed an accelerated decrease.
The weak PMI data followed Friday’s GDP report, which showed a 0.1% decline for a second straight month in October. This missed the market estimate of 0.1%. GDP rose just 0.1% in the three months to October.
The UK releases employment and wage growth numbers on Tuesday. The economy is projected to have lost 12 thousand jobs in the three months to October, after a sparking 200 thousand gain in the previous report. Wages including bonuses is expected to climb to 5% from 4.8%.
The Bank of England meets on Thursday and is expected to hold the cash rate at 4.75% after cutting rates by 25 basis points in November. The economy could use another rate cut but inflation remains a risk to upside, with CPI climbing in October to 2.3% from 1.7%. The BoE will be keeping a close eye on wage growth, which has been a driver of inflation.
The US releases PMIs later today. Manufacturing remained in contraction territory in November at an upwardly revised 49.7 and there is optimism that the new Trump administration’s protectionist stance could benefit US manufacturers.
The services sector is in good shape and improved in November to 56.1, up from 55.0 in October. The uncertainty ahead of the US election is over and lower interest rates have contributed to stronger expansion in services.
GBP/USD technical
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GBP/USD is testing resistance at 1.2638. The next resistance line is 1.2668.
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1.2592 and 1.2562 are the next support levels.
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