Sterling falls as private sector activity tumbles

The euro wobbled against the USD after Markit released the flash service and manufacturing PMI data for November. Manufacturing PMI increased from 45.9 to 46.6 while services weakened from 52.2 to 51.2. This was the first manufacturing gain for a while and is a positive sign for the European economy. The composite PMI moved closer to 50.0, mostly because of the contraction of the services sector. The improvement in manufacturing PMI was primarily driven by positive activities in Germany, where activity rose for the second month in a row. This news came as Christine Lagarde, the new ECB chair asked governments to increase public spending to boost their economies.

Sterling declined sharply after data from Markit showed that manufacturing activity declined in November. This decline was caused by the continued uncertainty over Brexit. In November, the flash composite PMI declined to 48.5, which was the lowest level since July 2016. Manufacturing PMI declined to 48.3, which was lower than the median estimate of 48.8. Services PMI declined to 48.6 from 50 in October. This is an important number because services make up 80% of the UK economy. Analysts now believe that the economy could drop by -0.2% in the fourth quarter. 

The Japanese yen gained against the USD after the market received weak inflation and PMI data from the country. The headline CPI remained unchanged at 0.2%. This was lower than the median estimates of 0.3%. According to Markit, the country’s manufacturing PMI increased slightly from 48.4 to 48.6. This was below the consensus estimates of 48.7. These numbers came at a time when Shinzo Abe’s government is planning to introduce the first fiscal stimulus since 2016. The country also implemented a tax increase on many consumer goods.

EUR/USD

The EUR/USD pair struggled for direction after the market received the manufacturing and service activity. The pair is trading at 1.1060, which is along the 38.2% Fibonacci Retracement level. The RSI has dropped from a high of 72 to the current 48 while the average true range has been unmoved. This is a sign that volatility has eased. The pair may end the week at the current levels as the market waits for more data and trade information.

GBP/USD

The GBP/USD pair declined to an intraday low of 1.2862. This was the lowest level it has been since November 14. It was also lower than this week’s high of 1.2970. On the 30-minutes chart, this price is along the lower line of the Bollinger Bands while the RSI has moved closer to the oversold level. The average true range, which is a sign of volatility, has been surging. The pair may continue moving lower to a low of 1.2850.

USD/JPY

The USD/JPY pair declined today as the market reacted to the weak CPI and PMI data from Japan. The price is trading at 108.47, which is below the intraday high of 108.70. On the hourly chart, the pair is trading along the lower line of the Bollinger Bands and the average true range has dropped to the lowest level since Friday. The oscillator of moving averages indicator has also turned negative. The pair may continue to drop after finding significant resistance at 108.70.