- UK business activity fell less than expected in July.
- The probability of a 50-bps rate hike by the BoE has significantly decreased.
- UK consumer confidence is still at an all-time low.
Today’s British pound (6B) futures outlook is bullish as investors expected a significant drop in business activity in the UK but were surprised by the slight drop. This news was received well by investors, as prices are pushing higher. However, business activity still fell from the previous month, which is worrying.
The S&P Global‘s Purchasing Managers’ Index (PMI) for the services and manufacturing sectors fell to 52.8, the lowest since February last year, from June’s 53.7. Chris Williamson, the chief business economist at S&P Global Market, expects the slowdown to worsen and that the readings showed a 0.2% quarterly economic growth rate.
“The concern is that rising interest rates, as the Bank of England seeks to control inflation, will cause demand growth to weaken further in the coming months,” Williamson said.
“To be hiking interest rates at a time of such weak business growth is unprecedented over the past quarter-century of survey history.”
The Bank of England is ready to raise rates by 50bps at its next meeting scheduled for August 4. However, bets on a 50bps hike have gone down from 100% to 68%. Data released on Friday also showed reduced consumer spending in June, and consumer confidence was still at an all-time low.
“After taking account of rising prices, retail sales fell slightly in June, and although they remain above their pre-pandemic level, the broader trend is one of decline,” Heather Bovill, an ONS statistician, said.
These reports point to the UK’s slowing growth, which raises concerns over the country’s economic outlook. The pound’s futures rally might be short-lived after all.
Looking at the 4-hour chart, the price has been trading in a tight range since July 18. The range support is at 1.1945, while the range resistance is at 1.2057. The price is trading above the 30-SMA, showing control belongs to the bulls, and the RSI also supports this as it’s trading above 50.
If bulls can maintain this momentum, we might see a break above range resistance with the next resistance level at 1.2158.