Pound shrugs as Construction PMI rises

The British pound remains range-bound in the Thursday session. Currently, GDP/USD is trading at 1.3977, up 0.16% on the day.

Construction sector rebounds

The UK construction industry accelerated in February with a PMI read of 53.3, up sharply from 49.2. The 50-level separates contraction from expansion, so construction is again showing growth. This is a result of new construction projects in anticipation of stronger economic conditions over the course of the year. February PMIs are pointing to the economy gathering steam, which should be a bullish sign for the British pound. The Manufacturing PMI rose to 55.1, slightly above the estimate of 54.9. The services sector also improved, with the PMI climbing to 49.5, up sharply from 39.5 beforehand. The national lockdown has resulted in pent-up demand, and with the government slowly opening up the economy, we can expect PMI numbers to continue to point upwards.

In the US, the focus is on employment data. Earlier in the day, unemployment claims rose to 745 thousand, up from 730 thousand in the previous release. Still, this beat the forecast of 758 thousand. On Friday, the market will get a look at Nonfarm Payrolls, which should be treated as a market-mover. There are concerns that the NFP release could mirror a weak ADP employment report, which showed that the economy created only 117 thousand jobs, way below the estimate of 203 thousand. The street consensus for the NFP release stands at 185 thousand, and a reading which misses expectations could sour investors and send GBP/USD to higher levels. Also on the job front, wage growth is expected to remain at a weak 0.2%, while the unemployment rate is projected to stay at 6.3%.

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GBP/USD Technical Analysis

• There is resistance at 1.3997, which is protecting the symbolic 1.40 level. The next resistance line is at 1.4040
• GBP/USD is putting pressure on support at 1.3912. Below, we find support at 1.3874
• The pair fell to 1.3916 today, the middle of its 6-month ascending wedge, bordered by 1.3800 and 1.4040. A drop below the 1.3800 level would open up a substantial correction lower for GBP

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