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GBP/USD Resumes Falls on Weak Manufacturing, High Trade Deficit

British manufacturing production unexpectedly dropped by 0.4%. A rise of 0.3% was expected. Also Britain’s trade balance disappointed when it widened to 8.9 billion pounds. GBP/USD reacted with a drop back to support.

The disappointing manufacturing figures is in correspondence with the ongoing erosion in the UK’s manufacturing PMI figures, which have even dropped below 50 points in July – which means contraction in this section. The bad news continues:

Also the wider industrial output figure that accompanied the release (and is of lower importance) remained unchanged – short of expectations for a rise of 0.4%.

The pound was trying to rise once again, but couldn’t breach 1.64. The release sent it lower, back to 1.6330, still above support at at the 1.6280 – 1.63 zone.

Further support is at 1.62, followed by 1.6110. Higher resistance is at 1.6470, followed by 1.6550.

The pound started the week higher, with a gap, enjoying the fact that contrary to the US and the euro-zone, the UK doesn’t have a debt problem. It managed to weather the storm started by Trichet’s weak moves – and continued with the historic downgrade of the US by S&P.

Britain has problems of its own. Even without this release, sterling was already losing ground.

Also the riots in the UK hurt the pound: what began in Tottenham on Saturday night has now spread to violence in Liverpool and Bristol as well.

For more levels and upcoming events, please see the British pound forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.