Forex News: Sterling Declines Steepen on a Disappointing UK PMI
THE TAKEAWAY: UK PMI for October reported at 50.6, a near 2-year low -> UK trying to recover from a three quarter technical recession -> Sterling drops further
The United Kingdom services activity increased at the slowest pace since a temporary decline in activity nearly two years ago according to forex news. Markit’s Purchasing Managers’ Index for services in October fell to 50.6 from the prior month’s 52.2 PMI, lower than the expected 52.0 PMI result. A PMI above 50.0 indicates expansion in sector activities.
Employment in the services industry decreased for the second month in a row in October. Expansion of new orders slowed a bit during the month, but still remained solid. Also, companies remained optimistic that activity will rise in the coming year.
The UK economy expanded 1.0% in the third quarter following three quarters of decline. GBP investors are looking for signs that the third quarter GDP rise is the start of a new trend and the UK economy will continue to expand. Markit Economist Andrew Harker said, “the latest UK services PMI data provide a warning to those who saw the strong growth in GDP during Q3 as symbolising the start of a strong and speedy economic recovery.”
That is why the disappointing PMI sent Sterling slightly lower against the US Dollar following earlier losses. GBPUSD is currently trading around 1.5976 in currency markets. The pair broke below the key 1.6000 line earlier in the session, and support could be provided at 1.5913 by a 2-month low.
GBPUSD 15-minute: November 5, 2012
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