Global macro overview for 04/09/2017:
After very good PMI Manufacturing data from the UK, today's Construction PMI disappointed market participants. The Markit UK PMI Manufacturing Index strengthened to 56.9 for August from an upwardly-revised 55.3 the previous month. This was above the median forecasts of 55.0. Besides, the score has been the strongest reading for four months and the second-highest reading in 3 years. But today the UK PMI Construction Index turned out to be the weakest upturn in the UK construction output for 12 months in August. The consensus was set at the level of 52.1 after 51.9 points a month ago, but the figure came in at the level of 51.1 points.
The UK manufacturing sector was strongly expanded towards new orders growth while production increased at the fastest pace for 7 months. The expansion was driven primarily by domestic factors, although there was still a robust reading for export growth with expansion boosted by a competitive currency and firm global trade growth. On the other hand, the UK construction continued to experience a slowdown this summer. Reduced levels of commercial work were a key source of weakness, which was offset by robust growth in a residential building. The new business volumes fell for the second month and the survey respondents linked subdued demand to reduced business investment and heightened economic uncertainty.
This mixed set of data will not quite help the Bank of England to change the current dovish point of view to more hawkish in order to hike the interest rates in the near future. Moreover, the ongoing Brexit negotiations and growing global uncertainty do not favour the British Pound as well.
Let's now take a look at the GBP/USD technical picture on the H4 time frame. After the data was published, the initial reaction was to the downside despite the previous attempts to break out through the technical support zone between the levels of 1.2961 - 1.2979. The clear bearish divergence between the price and the momentum oscillator indicates a possible downward move continuation towards the important support between the levels of 1.2861 - 1.2772.
