When did the rules change?

Posted Wednesday, August 3, 2016 by
Skerdian Meta • 2 min read

After the UK economic data released on Monday and on Tuesday showed that the manufacturing sector and the construction sector slipped into contraction the forex market was curious to see the services numbers today. We had a flash reading of the service sector in the middle of July of 47.4 PMI, but many hoped that it would pick up this time because the mid-July release included only half the month and the survey was done in a hurry to expose the first signs of the Brexit vote

Well, the numbers came bang on expectations and exactly the same as the mid-July reading at 47.4 PMI. That´s nearly 5 points below last month´s reading and it is a stinky number. New orders fell to 45.7 PMI against 52.3 prior, which is the lowest since March 2009, showing that this is not the bottom. Remember that if the number is below 50 PMI it means the sector is shrinking. In this occasion the three important sectors of the UK economy are shrinking, the construction, the manufacturing and the services.

GBP/USD resumed the uptrend after the services data was released

The GBP/USD is about 50 higher after the release. Why would it go up when all the sectors of the economy are falling in contraction one after the other? Why would you want to buy GBP when the BOE (Bank of England) is about to cut the interest rates, if not tomorrow, then in September for sure? What has changed? Do we buy a currency when the economy is going down now? I guess the forex market was expecting a worse number and they got relaxed when the number was published, but it´s still in deep contraction. We have a long term sell forex signal in this forex pair so we hope that the old rules of forex are applied again. 

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Related Articles
0 0 vote
Article Rating
Notify of
Inline Feedbacks
View all comments