- Pound Falls for Second Day as Stops Hit, Construction Slows
The pound declined for a second day against the dollar, tumbling 48 pips in four minutes as stops were hit below $1.2450, as data showed further signs of slowing in the U.K. economy.
Flows were thin overall, with the slide coming as the stops were triggered after a move higher in the euro against the pound, said traders, who asked not to be identified as they weren’t authorized to speak publicly. In mid-March sterling saw similar sharp moves without any accompanying news headlines, plunging in a short span of time on one day and spiking the next. Tuesday’s move came ahead of U.K. construction data that showed expansion in March but at a slower pace than forecast, in the latest assessment of the nation’s economy as it prepares to leave the European Union.
U.K. economic data may be showing “the first signs of cracking,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. “The pound is now a bit of a currency that when risk appetite declines, traders club together and say ‘with geopolitical risk, economic risk, Brexit risk, what do we do? We sell the pound.”
- GBP/USD falls 0.4% to 1.2440, after a 0.5% decline on Monday. Support from 55-DMA at 1.2428 is in jeopardy, according to Vassilis Karamanis, a strategist who writes for Bloomberg
- Resistance at 1.2496, Asia high; support at 1.2403, March 30 low
- “Following yesterday’s unexpected decline in manufacturing growth, today’s construction PMI has also disappointed, which is another blow for the pound,” writes Dennis de Jong, MD of UFX.com
- “Sterling has been very weak over the past nine months and the data simply isn’t giving the beleaguered currency any respite at present”
- This week’s data range from services PMI to industrial output, following Monday data that showed manufacturing growth unexpectedly cooled for a third month in March
- EUR/GBP climbs 0.3% to 0.8571, after a 0.7% rise on the previous day
- For more on major FX technicals, click here
- Yield on 10-year gilts is little changed at 1.06%, having earlier reached 1.05%, its lowest since October
