A winning streak of UK PMIs: the most important one, for the biggest sector, services, jumps 5.4 points to 52.9 points. This is also a big beat on predictions. Optimism is back after a month of doom and gloom. So, Brexit is probably not too bad, at least not now. Do we need to wait a few more months until we get a more stable picture?
GBP/USD gains ground and trades at 1.3360 which is a line of resistance. Will it go higher? The next level is 1.3480.
Here is how the move higher looks on the chart. Note that the initial bounce from the bottom of the range began before the announcement:
Analysis: Brexit – Encouraging signs, but economy still not out of the woods
Markit’s UK services PMI was expected to bounce back to 50 points in August, reflecting a delicate balance between expansion and contraction. The survey of the important sector in Britain plunged in July, the month immediately after the vote to leave the EU.
GBP/USD traded around 1.3330 ahead of the release, rising in the last minutes.
The previous PMIs rebounded sharply: manufacturing leaped by 5 points and returned to growth territory. Also, construction came out surprisingly high.
These purchasing managers’ indices have a significant impact as the figures are correlated with future economic activity. However, these are “soft data”, showing expectations and not what happened in reality. The “hard data” such as jobless claims and retail sales showed resilience in July: Brexit did not crash the UK economy.
However, the Bank of England reacted to the initial soft data and introduced a comprehensive monetary stimulus package.They responded in part to this particular services PMI survey, and they probably helped it recover with their “shot in the arm.”
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