- UK order expectations decline
- Manufacturing and services PMIs are expected to tick lower on Wednesday
- There is support at 1.2714 and 1.2641
- 1.2812 and 1.2885 are the next resistance lines
The British pound started the Tuesday session in positive territory but has given up these gains. In North American trade, GBP/USD is trading at 1.2737, down 0.16%.
UK manufacturing continues to sputter
The Confederation of British Industry industrial order expectations fell to -15 in August, down from -9 in July and missing the consensus estimate of -13. Output volumes for the past three months fell to -19, a huge decline from the July reading of +3. The data paints a grim picture of the manufacturing sector, and Wednesday’s manufacturing PMI is expected to point to ongoing contraction (the 50.0 line separates expansion from contraction). The August estimate stands at 45.0, compared to 45.3 in July, which was the lowest reading since May 2020. The manufacturing PMI last indicated to expansion in July 2022.
The services sector has looked better and is in expansion territory. Still, there are concerns as services business activity has been slowing. The July PMI slipped to 51.5, down from 53.7 in June and the estimate for July stands at 51.0, which would indicate very little growth. The silver lining from weak activity in manufacturing and services is that it points to a cooling UK economy which could provide support for the Bank of England to ease up on interest rate hikes.
Markets eye Jackson Hole symposium
Fed Chair Powell hosts the annual Jackson Hole Symposium which begins on Thursday. The Fed Chair’s speech is always a highlight, as investors will be looking for clues about the Fed’s future rate policy. Powell will be hoping not to make any waves and I expect a cautious, perhaps hawkish speech when Powell speaks on Friday. The future markets have priced in a pause at the Fed’s September meeting, but traders are divided over the November meeting and Powell’s remarks will be closely followed.
