GBP/USD – Pound Slips as PMIs Dip, BoE Hikes Again
MarketPulse | Mar 24, 2023 07:48AM ET
The British pound is down considerably on Friday after mostly soft numbers out of the UK. In the European session, GBP/USD is trading at 122.13, down 0.60%.h2 PMIs down, retail sales jump/h2
UK releases are a mixed bag on Friday. Business activity and manufacturing weakened in March. The Services PMI eased to 52.8, down from 53.5 in February and shy of the estimate of 53.0 points. Manufacturing fell to 48.0, versus 49.3 in February and an estimate of 52.8 points. Manufacturing has declined for eight straight months, with readings below the 50.0 level which separates contraction from expansion. Business activity continues to show modest expansion and is the driver behind economic growth in the UK.
Given the weak economic landscape, it’s no surprise that consumer confidence remains mired in negative territory. Double-digit inflation and high-interest rates have sapped consumer optimism. In March, GfK Consumer Confidence came in at -36, as expected and a bit higher than the previous reading of -38 points. With consumers may in a sour mood, a strong retail sales report for February was that much more surprising, with a gain of 1.2%. This beat the upwardly revised January gain of 0.9% and crushed the estimate of 0.2%. Core retail sales jumped 1.5%, versus 0.9% in January, which was upwardly revised, and beat the estimate of 0.1%.
h2 BoE raises rates by 25 bp/h2As expected the Bank of England raised rates by 25 basis points on Thursday. This marked an 11th straight hike, although the 25-bp move was the smallest increase since June. Is the BoE done with tightening? This week’s disappointing acceleration in inflation has increased the odds of at least one more hike, although BoE Governor Bailey was non-committal when asked about future hikes. Like the ECB, the BoE didn’t flinch from delivering an expected rate hike despite the banking crisis and I wouldn’t be surprised if more hikes are in store unless inflation shows clear signs of easing.
GBP/USD Technical
- There is resistance at 1.2324, followed by 1.2445
- GBP/USD has support at 1.2253 and 1.2132
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