UK PMI: what to expect of GBP/USD

Along with its ex-European peers, UK will publish its preliminary prints for the Manufacturing and Services PMIs for the current month. Prior surveys expect both results to retreat to sub-50 levels in response to expected higher uncertainty in the economy after the recent decision by the UK to stop being a member of the European Union.

In the case of the manufacturing PMI, the last time it came in below the expansion/contraction threshold was in April 2016 (49.4), while the Services PMI posted sub-50 levels for the last time in December 2012 (48.9).

In terms of FX, GBP/USD is looking to consolidate around current levels while markets continue to gauge the potential implications of a life outside the EU, this being the recurrent driver for the price action in the month to come along with risk appetite trends. Levels-wise, the recent high at 1.3481 emerges as the interim hurdle ahead of post-‘Brexit’ peak at 1.3535 followed by 1.3646, the 38.2% Fibo retracement of the 1.5020-1.2796 move.