More Disappointing UK Data – GBP Heading South Soon?

Posted Tuesday, July 4, 2017 by
Skerdian Meta • 2 min read

The UK construction report was released a while ago and it missed expectations. This additional miss from the UK casts doubt on the GBP surge last week.

A few weeks ago, we saw inflation surge to nearly 3% in the UK. A week later the BOE votes for a rate hike jumped from 1 to 3 and the BOE started making hawkish comments. Although, I´m positive Carney doesn´t like this situation one bit.

However, since then, the economic data has shown deterioration. Last week, consumer confidence dived to -10, while this week's manufacturing and construction figures took a dive from the last reading.

I´m not saying the UK economy has faltered, but the data has been getting weaker, particularly in the last month. To add insult to injury, inflation is surging. This is the worst possible situation for a central banker to be in. You can´t cut interest rates to help the economy because inflation will shoot even higher and you can´t hike the rates to cool inflation because it would hurt the economy further.

Well, central bankers get paid a lot, so let´s not worry about them. Instead, let´s concentrate on our trading. The data has been disappointing, but the service numbers tomorrow will hold market interest.

Services account for ¾ of the UK economy and are mostly about financial services. These services are and will be affected by Brexit, so I expect another miss tomorrow.

Besides that, the Q1 GDP report showed a quarterly decline for the 3rd time. This is the first time this has happened since the 70's.

Based on this data I´m getting anxious to open a long term sell forex signal in GBP/USD, similar to the AUD/USD signal we have opened. The USD side of the trade supports this idea as we explained in one of our previous updates, although let´s wait until tomorrow to see the service sector report.  


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