GBPUSD, H4            

UK flash July PMI plunged to 47.7 in the composite reading from 52.2 in June and below the median forecast for a decline to 48.5. The headline and nearly all of the component parts fell at the lowest levels since the height of the financial crisis in early 2009, giving a clear indication of the impact that the Brexit vote has had. Markit, the compiler of the survey, described the data showing a “dramatic deterioration in the economy,” estimating that the data is signalling a 0.4% contraction in Q3 GDP, assuming that August and September continue the slowing seen this month. A sharp drop in new orders, to 45.5 from 52.3, and a dive in the expectations component of the services PMI, both good leading indicators of the economy, suggest that the pain will continue. Sterling dove over a big figure to a 1.3165 low versus the dollar in the wake of the data release. The flash indicator is based on 80% of responses to the full survey. Final data will be released at the beginning of August.

The 4h chart has support at the 20 MA at 1.3182 and 1.3110 and resistance at 1.3275.

Meanwhile across the English Channel, French and German PMIs better than expected. French manufacturing as well as services PMIs unexpectedly improved in July, and while the German manufacturing reading eased, it fell back less than feared and remains firmly above the 50 point no change mark, while the services reading actually jumped higher. So a confirmation of what French national business sentiment numbers already indicated yesterday, namely that the impact of the Brexit vote on real sector sentiment has been limited so far, even as uncertainty increases. The financial sector by contrast has been hit severely, which confirms the issues Draghi raised yesterday – the apparent divergence between financial market and real sector confidence.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

GBPUSD, H4            

The close of the latest 4 hour candle was sufficient for us to take a SHORT position in this pair following a run up. The UK Retail Sales data (see below) simply added some fundamental momentum.  The 4hour candles had been forming a steady six consecutive march upwards from the Hammer candles of July 19.  The peak bull candle at yesterday’s (July 20) close and with a long wick followed by the following bearish candle with a wick to the south suggested at least a pause in the uptrend or a further retrace.  The 08:00 candle this morning suggested further downside with target 1 at 1.7546 and possible target 2 at 1.7465 where we started a few days ago.

UK June retail sales undershoot expectations due to wet weather, which stirred apathy for summer fashion purchases. The headline sales figure contracted by 0.9% m/m, reversing the 0.9% m/m gain of May. The median forecast had been for a 0.5% decline. The y/y comparison was 4.3%, short of the 5.0% median forecast and down from the 5.7% y/y gain seen in May. It’s not clear if the June 23 referendum, either the run-up or in the initial wake of, had much impact. Anecdotal signs suggest that retail sales dipped in the week after the Brexit vote, but have since rebounded.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

GBPUSD, H4             

The UK headline unemployment rate fell unexpectedly to 4.9% from 5.0% and employment and inactivity rates registered record highs.

UK unemployment fell by 54,000 to 1.65 million between March and May.  Average weekly earnings including bonuses increased from 2% to  2.3%, in line with expectations.  The employment rate – the proportion of people aged 16 to 64 in work – was 74.4%, the highest since comparable records began in 1971 and the Office of national Statistics also reported that the inactivity rate rates those 16-64-year-olds not working and not seeking work – was 21.6%, the lowest since 1971. The new finance minister Philip Hammond “Today’s employment and wage figures are proof that the fundamentals of the British economy are strong”.

All this is a pre-Brexit snapshot. The median forecast had been for an unchanged 5.0% outcome. The more timely claimant count figures, for June, painted a slightly different picture, with jobless claimants rising fractionally, with May data revised to 12.2k from -0.4k reported originally. All this is what we’re seeing in the rear view mirror; a view that’s changing for the worst in the wake of the Brexit vote.

A survey of 1,000 heads of businesses by the Institute of Directors, conducted in the two days after the vote to leave the EU, found that 24% were planning to freeze recruitment, 5% were planning on making reductions, and 22% were considering moving some of their operations abroad (versus only 1% who said they were bringing their operations back).

Sterling spiked up on the release of the headlines with cable touching 1.3175, GBPJPY up to 140.30 and EURGBP down to 0.8350.  Our Quarterly position on Cable remains and we are still in our SHORT GBPUSD trade from July 14^th.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

GBPUSD, Daily             

The next UK Prime Minister appears to Theresa May as her only opponent to be the next leader of the ruling conservative party, Andrea Leadsom, withdraws from the contest.  Mrs Leadsom was the last of the Leave campaigners to be in the running for the top job in UK politics, the UK votes for a Brexit and none of its leaders are left standing.

Sterling immediately responded positively on the news as cable spiked over 1.3000 before falling back and EURGBP tested the 0.8500 level. At the same time the UK100 rallied this morning to 6650 and officially entered a “bull market” having rose 20% since its most recent low of 5565 at the beginning of February.  The strong rally in the UK100 has a strong correlation to the fall in the value of sterling since the Brexit vote. Many of the companies within the UK100 earn most of their revenue in US Dollars, but report in UK pounds thus helping their immediate short term outlook.

Cable could recover from these 1.300 levels as the political situation in the UK continues to clarify itself. However, with the BoE MPC meeting this week and expected to announce a rate cut AND more quantitative easing, the stock market and bond market rallies are likely to be the main beneficiaries.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

GBPUSD, Weekly            

UK trade deficit widened to GBP 2.3 bln in May data, out from the GBP 1.3 bln deficit since in May last year. The goods deficit widened by GBP 500 mln to GBP 9.9 bln, with exports falling by GBP 2.1 bln while imports declining by GBP 1.6 bln. That was the biggest goods deficit for the month of May on record, according to the ONS stats office. The services surplus rose to GBP 7.6 bln.

The impact of the recent sharp decline in the pound will be mixed to negative, benefitting exporters but also pushing up costs of imported components for many. The UK imports far more goods than it exports. Goods such as cars will become more expensive to the UK consumer, with 85% of demand is met by imported cars while domestic manufacturers rely heavily on imported parts. The trade deficit has acted a drag on UK economic growth, which fell to 0.4% in the first three months of this year, but a far more significant impact comes from the poor performance of the UK’s foreign investments.

The pound is trading softer in London trade, with Cable having ebbed to the low 1.2900s and EURGBP having lifted above 0.8570. Signs of weakening UK business and consumer sentiment, and an ebb in economic activity are keeping a lid on the pound. A survey of UK consumer confidence by Gfk, conducted after the Brexit vote (between June-30 to July-5), dove to -9 from -1, which is the sharpest drop in the data series since 1994. Think tank NIESR said yesterday that it estimates UK GDP went negative in June after stagnating in May. Footfall on high street shops is down and car sales and property market transactions are also down. There are bright spots, with exporters such as Burberry, a high-end fashion retailer, likely to benefit from the weaker pound, while a trade deal with India may happen within a year (a deal between the EU and India has been held for years by the former’s concerns about wine and car trade). But it’s unlikely the good-news stories will offset the probability that the UK ends up with a net-worse trade deal with the EU, given the terms the UK wants. The reason the pound is trading nearly 12-14% lower is because markets are discounting a shock to the UK economy’s terms of trade.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.