The Sterling fell for the fifth consecutive day against the greenback as the United Kingdom reported weaker than expected manufacturing PMI data for January. January’s manufacturing PMI came in at 56.7 versus analyst estimates of 57.2. Although manufacturing remains elevated, traders want more progress as they become more eager to see higher interest rates from the Bank of England (BoE).
“The data that we’ve had since the start of the year have been good but many people have been disappointed it hasn’t been better,” said Jane Foley, a senior currency strategist at Rabobank International. Sterling has been a currency darling over the last six-to-eight months, but price action has seemed to top out after striking 1.6666 and was down against 14 of the 16 major currency peers.
Momentum in the GBPUSD has gained speed during the last week, and some analyst believe it is necessary to remain short. “With the BOE, there is a small risk that the expected reformulation of the forward guidance policy expected in next week’s Inflation Report could be brought forward to this week’s MPC meeting,” said Alvin Tan, director of foreign-exchange strategy at Societe Generale. Tan recommended to remain short the Sterling against the greenback.
The fall began to occur after the Sterling weakened ahead of the prelim GDP figures, and it has been down since. Targeted support has been breached well below the 1.6480, currently at trading at 1.6305. The current price action is playing out to the weekly chart analysis published on January 17.
Weekly support has been taken out at 1.6315, and price action is resting on the 72 EMA. A break and close below, the GBPUSD will likely trend lower to 1.6175.