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GBP/USD bounces off support as another month of contraction was reported in the manufacturing sector, but it wasn’t terrible. The purchasing managers index dropped to 49 points, within the low expectations of 48.9 points.  

Pound/dollar dipped to the 1.62 line prior to the release, on fear of a weaker figure, and is now back in the previous range.

Last month already saw a dip into contraction zone. The indicator fell to 49.4 points (revised from 49.1 initially reported), under the critical 50 point mark that separates contraction from expansion (growth).

While there was no disappointment, the outcome is still depressing. This might increase the talk about more quantitative easing (QE) in Britain. The current Asset Purchasing Facility’s size is 200 billion pounds.

Currently only member wants an expansion, while the other 8 oppose it. But as the votes for a rate hike disappeared, new votes for a QE might appear given the deteriorating conditions in the British economy.

Also in the euro-zone, the manufacturing sector is contracting. The PMI has been revised to the downside, from 49.7 to 49 points. China remains in the growth zone, with 50.9 points according to its official figures. Unofficial numbers point to contraction.

This sector is doing worse than the other two sectors: construction (published tomorrow) and services (published Monday).

GBP/USD was trading above the 1.62 line before the publication. After losing the 1.64 line earlier in the week, it also lost the 1.6280 to 1.63 zone.

Further support is at 1.6110, followed by 1.60. For more on GBP/USD, see the British pound forecast.