PMIs Point to Contraction
Key sectors of the British economy remain in contraction, according to December’s PMI releases. On Thursday, Final Manufacturing PMI, slowed to 47.5, down from 48.9 a month earlier. The PMI has not pointed to expansion (a reading above the 50-level) since April, as the manufacturing sector remains in decline. There was no relief from Construction PMI on Friday. The index slipped from 45.3 to 44.4, shy of the estimate of 45.8 pts. We’ll get a look at Services PMI later on Monday with the index expected in at 49.1 pts.
The pound is struggling to remain above the symbolic 1.30 level, and a weak Services PMI could sour investor sentiment towards the currency and push it to lower ground.
GBP/USD tested resistance at 1.3150 on Friday but has retracted. On the downside, 1.3050 is an immediate support line, which could be tested early in the week. Below, there is support at 1.30, which has psychological significance.