GBPUSD, H1
The cooling of the bid underpinning the USD, which started yesterday following the weak PMI data, has continued overnight and into the European session. The US Flash Markit Manufacturing Index fell to 50.6 in May versus 52.6 in April. It was at 56.4 a year ago. This is the worst since September 2009. New orders dropped into contraction at 49.7 versus 53.5. The services index slid to 50.9 from 53.0, and was at 56.8 last May. This is the weakest since February 2016. Prices charged have declined versus April. And the composite also declined to 50.9 from the prior 53.0, and was 56.6 last year. This is the lowest since May 2016. The data reflects the worrisome sentiment amid global risks.
Today, even beaten up Sterling continues to recover with 1.2700 in sight. The departure of Mrs May and her replacement by a harder-line Brexiteer is all but priced in to a lowly Pound today. The UK Retail Sales for April showed remarkable strength, being better than expected, and signals that the UK shopper will not be deterred and consumption remains robust. As the UK High Street reels from closures, the growth in the online sector in the three months to April helped to boost the reading and is largely driven by clothing purchases.
A surprising bright spot for UK data, however the UK economy is still struggling due to the Brexit uncertainty and one data point certainly “does not a trend change make”. EURGBP yesterday completed 14 consecutive days of gains, its largest rally since the Euro became legal tender in 1999.
Stuart Cowell
Head Market Analyst
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