Mario Blascak, PhD
Independent Analyst
- The UK manufacturing PMI decelerated sharply to 53.9 in April, the lowest level in 17 months and it is weighing on GBP/USD.
- GBP/USD is heading lower after the first quarter GDP disappointed decreasing the chances of the Bank of England raising the Bank rate on may 10, 2018.
- New target for GBP/USD is 1.3570 representing 50% Fibonacci retracement of the previous upmove from 1.2740 towards 1.4377.
The GBP/USD is under renewed pressure falling to 1.3700 after the UK manufacturing PMI disappointed in April decelerating to 53.9 compared to 54.8 expected by markets. With the market attempting to break the 1.3700 round figure, the 1.3570 becomes a new target.
The PMI report said that the upturn in the UK manufacturing sector slowed further at the start of the second quarter with rates of expansion easing for output, new orders, and employment, in part reflecting a weakening in the pace of expansion of new work from abroad.
The PMI manufacturing report confirms the general softness of the UK economy indicated by the unexpected slowdown in the UK GDP during the first quarter of this year that rose 0.1% over the quarter while decelerating to 1.2% over the year. The slowdown in the economic activity is shifting away from the expectations of the Bank of England rate hike on May 10.
Technically the GBP/USD broke the key support level of 1.3760 representing the 38.2% Fibonacci retracement line of a greater move higher from 1.2740 to 22-month high of 1.4377 from on Monday and it is sliding further down. With GBP/USD falling past the 1.3760 level and breaking below the psychological round big figure of 1.3700, the 1.3570, representing 50% Fibonacci retracement of the above-mentioned upmove becomes a new target.
GBP/USD 1-hour chart
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