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Sterling edged lower back to support levels near the 10-day moving average following a soft construction PMI out of the U.K, which fell to 59.4 from October’s 61.5 readings, and though still signalling robust activity, more deceleration looks likely over the coming months, as being portended by the dive in mortgage approvals. Cable dipped to an Intraday low of 1.5707, though follow-through has been limited.

The U.K. Markit construction purchasing managers index came in  weaker than expected in the November reading, dropping to a new cycle low of 59.4 after October’s 61.5 reading. This is a fairly pronounced drop -off from September’s 64.2 cycle high. The recent dive in mortgage approvals has been portending a decline in activity in the housing sector, which in turn will have broader economic implications as the property sector’s multiplier effects weakens.

The BoE’s final Monetary Policy Committee meeting of 2014 is scheduled for this week. The BoE’s policy announcement is widely expected to leave the repo rate at 0.5% and QE total at GBP 375 billion pounds. No statement is likely, as per normal following unchanged decisions, so we’ll have to wait for the minutes to be published two weeks hence, on Dec-17, for insight. Last month’s minutes said there was a “material spread of views on the balance of risks to the outlook” in the Committee, which is also expected this time around.  The indecision will likely keep the pound buoyed against most major currencies.

The GBP/USD is hovering around the 10-day moving average near 1.57.  Momentum has turned positive with the MACD (moving average convergence divergence printing in the black with an upward sloping trajectory.  The RSI (relative strengh index) is printing a reading of 42, which is in the middle of the neutral zone and reflects consolidation.

Article by ForexTime

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