GBP/USD – Pound Tumbles on Weak UK Manufacturing Data

The British pound has greeted the new year with sharp losses, as the pair trades in the low-1.54 range in Friday’s European session. GBP/USD reacted sharply to a soft British Manufacturing PMI report, as the key indicator slipped to 52.5 points in December. Net Lending to Individuals improved to 3.3 billion, well above the forecast. In the US, today’s highlight is ISM Manufacturing PMI.

On Friday, British Manufacturing PMI dipped to 52.5 points, a 3-month low. The index was short of the estimate of 53.7 points. The pound has reacted sharply, losing about 160 points so far on the day. We’ll get a look at Construction and Services PMIs early next week, and the pound could lose more ground if these indexes fall short of expectations. The markets are bracing for more negative news on Friday, as US ISM Manufacturing PMI is expected to drop to 57.4 points in the December reading.

The US dollar had its way with its rivals in 2014, and the British pound was no exception. The British currency started the year in excellent shape, trading at 1.64. However, the pound slipped badly in 2014, dropping to 1.5550 by the end of the year. The US economy continues to outperform that of the UK, and monetary divergence could play a major role in the fortunes of the pound in 2015. The Federal Reserve is expected to raise interest rates in 2015, and if the BOE does not follow suit, the pound is likely to lose ground versus the dollar.

GBP/USD for Friday, January 2, 2015

GBP/USD January 2 at 12:15 GMT

GBP/USD 1.5418 H: 1.5583 L: 1.5413

GBP/USD Technical

• GBP/USD edged lower in the Asian session. The pair has posted sharp losses in European trade, breaking below support at 1.5505.
• 1.5505 has switched to a resistance role as the pound has recorded sharp losses.
• 1.5392 has weakened in support. 1.5282 is stronger.
• Current range: 1.5392 to 1.5505

Further levels in both directions:

• Below: 1.5392, 1.5282, 1.5165 and 1.5008
• Above: 1.5505, 1.5644, 1.5717, 1.5864 and 1.6000

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Friday. This is a result of sharp losses by the pound, which has led to more short positions being covered and an increase in long positions. The ratio has a majority of long positions, indicative of trader bias towards the pound continuing to move to higher ground.

GBP/USD Fundamentals

• 9:30 British Manufacturing PMI. Estimate 53.7 points. Actual 52.5 points.
• 9:30 British Net Lending to Individuals. Estimate 2.5B. Actual 3.3B.
• 9:30 British M4 Money Supply. Estimate 0.2%. Actual 0.0%.
• 9:30 British Mortgage Approvals. Estimate 59K. Actual 59K.
• 14:45 US Final Manufacturing PMI. Estimate 54.1 points.
• 15:00 US ISM Manufacturing PMI. Estimate 57.6 points.
• 15:00 US Construction Spending. Estimate 0.4%.
• 15:00 US ISM Manufacturing Prices. Estimate 43.1 points.

*Key releases are highlighted in bold

*All release times are GMT

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