Pound dips despite strong construction PMI

The British pound is in negative territory on Tuesday. In the North American session, GBP/USD is trading at 1.3790, down 0.38% on the day.

UK PMIs continue to roll

PMIs are useful gauges of measuring the health of key economic sectors, and the UK economy is in robust shape, according to the June PMI reports, all of which posted readings above the 60-level.

Manufacturing PMI came in at 63.9, followed by Services PMI at 62.4 points. On Tuesday, Construction PMI rose to 66.3, up from 64.2 and ahead of the consensus of 63.8. With the 50-level separating contraction from expansion, these numbers point to strong expansion across the UK economy.

The fly in the ointment is the upsurge in Covid-19, as new daily cases have climbed above 24 thousand. This hasn’t dissuaded Prime Minister Boris Johnson from moving ahead with plans to end all health restrictions on July 19th, even though some health officials have voiced concerns that the move is premature.

In the US, the services sector slowed in June. The ISM Non-Manufacturing PMI dropped to 60.1, down from the record-breaking 64.0 in May. The ISM employment component contracted, another indication that employers continue to have difficulty finding employees. The Markit Services PMI was revised lower, from 64.8 to 64.6 points.  The services sector remains strong, but these releases are unlikely to make the Fed reconsider tapering earlier than planned in 2022.

Attention will now shift to Jerome Powell & Co., as the FOMC releases the minutes from the June policy meeting on Wednesday (18:00 GMT). With the recovery continuing to gain traction, it would not be a surprise if the minutes had a hawkish tone, which would be bullish for the US dollar.

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GBP/USD Technical Analysis

• There is resistance at 1.3938. Above, there is resistance at 1.4043
• On the downside, 1.3730 is the first level of support. This is followed by support at 1.3627

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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