UK industrial production grew 0.3% in June compared to May, when it fell 0.6%. Forecasts called for a reading around 0.6%. The slower growth can be attributed to the strong pound and problems in the euro area.
Manufacturing production in June also grew 0.3% in June, rebounding from a -1.3% reading in May. Economists called for a reading around 0.7%.
(Source: Office of National Statistics; click to enlarge)
Growth was driven by transport equipment, basic metals and food. 8 out of the 13 components registered declines, while 5 grew.
The softer-than-expected data pulled GBP/USD lower after the release. In the 1H chart you can see that cable was also drifting after finding resistance at 1.6888. The reaction to UK data came down to the common lows around 1.6820-1.6825.
(click to enlarge)
Looking at the 1H chart, you can see the pair trying to consolidate since Aug. 1, after a downtrend that began from 1.7190 high on the year.There is a central pivot area between 1.6845-1.6856. A break back above 1.6860 would suggest further consolidation in GBP/USD, otherwise, the bearish bias should remain toward the 1.6010 area.
Bank of England Risk:
The consolidation range sets up a picture of indecision ahead of the BoE decision that is due tomorrow (8/7). The Monetary Policy Committee (MPC) starts the 2-day meeting today.
If the reaction to the MPC’s monetary statement is a break out of the consolidation range ,we should look for some short-term swing. To the upside, there is upside risk toward 1.70 in the context of a short-term bullish correction against against the prevailing downtrend in the medium term. A break below 1.68 continues the medium-term bearish outlook, with downside risk toward the 1.67 May-June lows.
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