GBP/USD – Pound up on upbeat manufacturing PMI

on Sep 2, 2013
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**iNVEZZ.com, Monday 2 September:**

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The CIPS UK Manufacturing Index for August reported in at 09.28 BST today, comfortably beating forecasts for 55.0 with a strong reading of 57.2 and well above the prior period’s 54.8(revised up from 54.6). The reading was the fourth straight positive result and saw the indicator reaching a two-and-a-half-year high, buoyed by manufacturing output and new orders which had improved at their fastest pace since August of 1994.

Employment also showed an uptick in August, as well as exports, albeit the domestic market was the main source of new contracts.
The figure invigorated the sterling bulls, with the GBP/USD reaching 1.5593 in a matter of minutes following the release.

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The only negative in the manufacturing report was the surge in input prices to a two-year high, with costs jumping on costlier crude oil, raw materials, polymers and paper. The month-on-month 10.4 points uplift in input prices was the second-steepest in the survey’s history. Selling prices also rose, but at a significantly lower rate than the input costs. In the result, the Bank of England’s forward guidance ‘’knockout clause’’ is looking more likely to be activated, as the risk rises of higher inflation that targeted.

!fm[](/uploads/story/5232/87.png)

The pound continues to find support above the rising trend line projected from the July bottom and its supporters will be looking forward to the MPC Rate Statement this Thursday (vertical line on the chart below). The GBP/USD has decidedly bullish momentum in trading so far today, with the Relative Strength Index on a 4-hour chart having surpassed 50. The currency pair is currently changing hands at around 1.5583, half a percent up intraday.

!fm[](/uploads/story/5232/85.png)

The bulls will surely be looking to test the 1.5710 August top, with the bears cautious and hoping for a double top similar to December 2012 before the tapering debate is resolved. The following chart compares the period from March until now (left) with that of September 2011 through December 2012.
!fm[](/uploads/story/5232/86.png)

Levels of resistance today: 1.5593, 1.5606 and 1.5640.
Levels of support: 1.5555, 1.5529 and 1.5504.

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Currency Briefing: Euro falls to five-week lows against the dollar Forex: GBP/USD making a turn above 1.55

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