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The British Pound has come under heavy selling pressure today on the back of the release of the latest set of UK services and manufacturing PMI readings. The manufacturing reading was seen falling to 46.9 from 47.8 prior, in stark contrast to the 47.9 reading the market was looking for. The decline marks the sharpest drop in factory sector activity in 5 months with output seen falling for a third consecutive month. Exports were seen falling at their fastest pace in four months with new orders also seen falling sharply. Brexit-related difficulties as well as general inflation were cited as the main headwinds to the sector.

On the non-factory side, the reading was seen falling to 55.1 from 55.9 prior, again below the 55.5 the market was looking for. The survey responses noted spending reductions among corporate clients and elevated economic uncertainty as the two main drags on activity.
 

BOE View

With the economy clearly suffering and more BOE tightening projected, the near-term prospects for the Pound look dim. Tomorrow’s CPI reading will now take on greater focus. If residual strength is seen around the 10% level, UK growth forecasts will be trimmed sharply amidst increased BOE tightening expectations, likely to lead GBP lower near-term.
 

Technical Views

GBPUSD

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The failure at the 1.2659 level has seen the market reversing sharply lower. Price has fallen back under the bull channel top and is now trading back below the 1.2437 level. This is a key area for the market and while below here, the focus is on a further push lower in line with bearish momentum studies readings. 1.2270 is the next support to watch ahead of a much bigger level down at 1.853 where the bull channel lows sit also. 

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