UK Manufacturing and Housing Show Positive Signs

The latest survey on Britain's manufacturing sector indicates a potential turnaround in its prolonged downturn, although companies are still exercising caution and raising prices, as reported on Friday.

The S&P Global/CIPS manufacturing Purchasing Managers' Index (PMI) recorded a third consecutive monthly improvement, reaching 47.2 in November compared to October's 44.8. While this marked progress, the index remained below the 50.0 growth threshold for the 16th consecutive month. The severity of the downturn in output and new orders eased, but manufacturers maintained a cautious stance due to market uncertainty, leading to job losses, stock depletion, and reduced purchasing. Input costs decreased, but manufacturers, for the second time in six months, raised selling prices slightly to repair profit margins.

In the housing market, British house prices unexpectedly rose for the third consecutive month in November, suggesting a potential abatement of the housing market downturn. Despite a 2% year-on-year drop, it was the smallest decrease in nine months. The housing market, which boomed during the COVID-19 pandemic, had faced challenges from higher borrowing costs as the Bank of England grappled with elevated inflation.

In the retail sector, British store chains experienced the slowest increase in prices in nearly a year and a half, according to the British Retail Consortium. Annual shop price inflation dropped to 4.3% in November, the weakest since June 2022. Food price inflation decreased to 7.8%, while non-food inflation eased to an annual 2.5%. The broader consumer price inflation in Britain was 4.6% in October this year, down from the peak of 11.1% in October 2022. The Bank of England has paused its interest rate increases but remains cautious about cutting borrowing costs.

In the global context, the U.S. dollar fell after Federal Reserve Chair Jerome Powell's cautious remarks on further interest rate moves. Powell acknowledged that U.S. monetary policy was slowing the economy as expected, leading to market expectations that the Fed might have concluded its rate hikes.

Data showed the U.S. manufacturing sector remained weak in November, with factory employment declining, providing evidence of a slowdown in economic momentum. The Institute for Supply Management (ISM) reported that the U.S. manufacturing PMI remained below 50 for the 13th consecutive month, indicating contraction in manufacturing. Some industries reported growth, while others cited the need to reduce inventory levels, with manufacturers expressing downbeat sentiments. The decline in the PMI might overstate the weakness in manufacturing, as orders for durable goods and factory production have shown strength. Despite these signs, most economists do not anticipate a recession in the coming year.

Investors are closely watching the November nonfarm payrolls report to assess the U.S. economy's resilience amid higher interest rates. Oil prices remain volatile, and central bank meetings in Australia and Canada could reinforce the belief that rates have peaked. A strong jobs report might hinder expectations of an early easing of the Federal Reserve's policy, impacting Q4 stocks and bonds. Conversely, a weak report could raise concerns about an economic slowdown. Tuesday's data is anticipated to show a moderation in job openings, and Thursday's jobless claims report will be scrutinized for signs of rising unemployment. Hence, the pound might gain some extra backing in this timeframe due to the comparable return rates between the two countries. However, it remains under strain and is primarily influenced by the economic conditions of the United States.

Data for Technical Analysis (30 Min) CFD GBP/USD

Resistance : 1.2686, 1.2687, 1.2690

Support : 1.2680, 1.2679, 1.2676    

30Min Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 1.2675 - 1.2680 is touched, but the support at 1.2680 cannot be broken, the TP may be set around 1.2687 and the SL around 1.2672, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.2686 - 1.2691, TP may be set around 1.2695 and SL around 1.2677, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.2686 - 1.2691 is touched, but the resistance 1.2686 cannot be broken, the TP may be set around 1.2680 and the SL around 1.2694, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.2675 - 1.2680, TP may be set around 1.2672 and SL around 1.2689, or up to the risk appetite.       

Pivot Points Dec 04, 2023 03:09AM GMT

Sources: Investing 1, Investing 2