UK Services PMI to pressure Sterling this morning
Yesterday’s downward surprise in the UK manufacturing PMI hurt Sterling. We think there is more to come today; our economists forecast a downside surprise on the UK Services PMI this morning (09:30 BST); BNPP forecasts 59.00 while the consensus has the index unchanged at 60.50. We think there is vulnerability in GBP to softer data. The GBP data surprise index continues to retrace further from a bullish extreme suggesting that stronger releases will have a fading impact on GBP, and the risk is weaker data hurting the currency. At the same time, FX investor positioning in Sterling remains stretched and represents a significant vulnerability for a GBP reversal. According to BNP Paribas FX Positioning Analysis, the score on GBP is at +30 (on a scale of -50 to +50) and equals the year’s high set on January 1. We maintain our short GBPUSD recommendation from 1.6040 targeting 1.5330, with our stop at 1.6310.
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BNP Paribas