UK Services PMI misses with 53.8 – GBP dips

A slightly worse than expected print on Britain’s Services PMI: a score of 53.8 points, reflecting weaker growth.  The previous PMIs were OK, but this is a significant miss, a drop of 2 points and coming from the largest sector.

GBP/USD dipped to 1.2860, a quick loss of 20 pips, before bouncing and recovering  some of its losses.

Markit’s purchasing managers’ index for the services sector was expected to slip from 55.8 to 55 points in May. The services sector is the largest in the US, and the publication usually has a significant impact on the pound.

GBP/USD traded around 1.2880 ahead of the publication. Cable opened the week with a downwards gap but closed it quickly.

London Attack, Thursday’s elections

However, we are three days away from the elections and a day and a half after the terror attack on London Bridge. Severn people were murdered and 21 are in critical condition after three attackers drove a van into a crowd and then continued with shooting and stabbing people.

The event dampens the mood and may also impact the elections. In theory, a focus on security normally boosts  right wing parties. However, Theresa May has been Home Secretary and then Prime Minister, so the responsibility of being tough on terror lies with her.

Opinion polls remain all over the place: some continue showing a tightening of  the Conservative lead while others show stability and even a double-digit margin.

Markets  would like to see May’s Tories enjoy a landslide victory and believe this could turn into a softer stance on Brexit. A small majority like now would not be too good for the pound as the Hard Brexit stance could persist. A hung parliament could be even worse for the pound.

More:  GBP/USD: Every poll pulls the pound [Video]

GBP/USD levels

Resistance awaits at 1.29, followed by 1.2980 and 1.3050. Support is at 1.2770 and 1.27.