GBP/USD Breaks Resistance on Services PMI

GBP/USD made a breakout above another resistance level, riding on a positive PMI this time. It fully recovered from the blow it got yesterday and is better positioned for QE2. Will it jump higher?

British purchasing managers’ index for the services sector  scored 53.2 point, better than 52.4 that was expected. Predictions stood on a drop from 52.8 to 52.4, but the figure surprised. Yesterday, the pound was pounded on weak PMI in the construction sector. Construction was a key to the strong growth in Q3, and a weaker number meant slower growth.

Well, the mood changed today with the good result from the services sector that got further away from the important 50 point line that marks the difference between contraction and expansion.

GBP/USD now trades at 1.6116, jumping over the 1.6080 level. The next level isn’t that close – 1.6280. Below, the round number of 1.60 provides support. The recent GDP figure took the pound out of its relative weakness.

More technical levels can be found in the recent British Pound forecast.

The Services PMI is another factor to be weighed by policymakers as they meet tomorrow (Thursday) to make their rate decision, less than 24 hours after the critical QE2 decision in the US. Current expectations for the FOMC meeting stand on a plan of $500 billion.

More on the big quantitative easing event:

• QE2 Expectations Narrowing
• 5 Scenarios for QE2

Will the pound continue going up? Or will it return to its previous vulnerable position?

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