GBP On The Decline

The British Pound continues to depreciate against the Dollar today. GBPUSD is now breaking below the rising channel from 2020 lows, suggesting the room for a much deeper correction as the upside move in the dollar gathers more pace amidst a growing risk off backdrop. On the UK side of things, the market is caught between optimism ahead of the next scheduled easing of lockdown measures on April 12th and caution over the events in Europe and fears that a third wave could hit the UK.

Manufacturing Surges Again

The latest set of economic data in the UK yesterday highlighted further improvement within the US business landscape. The flash IHS manufacturing PMI for the month was seen surging higher to 57.9 from 55.1 last, beating expectations of a 55 reading. The continued uptick in manufacturing performance reflects not only the resilient demand seen in the factory sector across the pandemic but also the rising demand ahead of the planned easing of lockdown over the coming quarter.

Service Sector Back In Growth

The services PMI reading saw an even stronger jumping, surging to 56.8 from the prior month’s 49.5, well above the expected 51.1 level the market was looking for. With this increase, the services sector has now moved back into positive territory for the first time since the pandemic began. The sudden shift higher here reflects a greater level of optimism among hospitality and other service sectors ahead of the coming quarter where business is forecast to materially pickup ahead of lockdown officially ending on June 21st.

Input Prices Rising But Inflation Holding Steady So Far

Additionally, the survey data showed that once again manufacturers reported higher costs form suppliers. Input prices were seen rising to a four-year high with companies citing customs delays and disruptions in global shipping as adding to the upside pressure. This is a trend which had been developing steadily over recent months, adding to UK inflation expectations. However, the latest CPI data for the UK released yesterday showed that consumer prices unexpectedly fell over the last month, suggesting that the lift off in inflation won’t kick in until reopening is further progressed.

Technical Views

GBPUSD

The sell- off in GBPUSD has seen price breaking down below the 1.3747 level and the rising channel support line. While below here, the outlook looks skewed towards further losses with the 1.3516 level the next big support to note. Below there, the 1.3191 level is the next major support level to watch.

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