GBP/USD Falls on Another Weak Manufacturing PMI

It’s becoming a tradition. Yet again, the British manufacturing sector disappointed and dropped to 51.3 points. Growth is grinding down to a halt. Early expectations stood on a small rise to 52.2 points. GBP/USD is losing ground quickly.

GBP/USD is now at around 1.6000, down from 1.6070 before the release. It is still holding on to minor support at 1.60. Note that the move began a little before the official release. Leaks are quite common with these releases, but the downwards move continues also afterwards.

At the beginning of 2011, the manufacturing sector was the locomotive of the economy, with purchasing managers’ indices around 60. The critical 50 point mark separates contraction from growth.

This strong growth was erased since then. In the past three months, this figure disappointed time after time, losing around 8 points in 3 months, reaching 52.1 points in May.

Earlier this week, GBP/USD dropped to a 5 month low. It went as low as 1.5910, but managed to rise above 1.60. The 1.6110 line capped it very well. Before the release, cable traded at around 1.6075.

For more on the pound, see the GBP/USD Forecast.

The Bank of England is expected to leave the interest rate unchanged for another month, and is predicted to do so until the summer of 2012, providing room for the pound to fall.