GBP/USD consolidates after strong UK data and budget speech

The GBP/USD is little changed as traders assess Rishi Sunak’s annual budget proposals and the strong construction sector. It is trading at 1.3940, which is a few points below yesterday’s high of 1.400.

Strong UK data

On Monday, data by Markit revealed that the country’s manufacturing sector continued to expand in February. Yesterday, while the services PMI numbers missed estimates, they were better than in January. 

Today, data by the same company showed that the important construction sector also improved. The construction PMI increased from 49.2 in January to 53.3 in February. The index has been above the 50-mark in 8 of the past 9 months. 

This growth was mostly because of the residential construction sector, which has benefited from the government’s incentives to boost homeownership. Indeed, this week home builders Persimmon and Taylor Wimpey reported strong quarterly earnings.

The GBP/USD is also reacting mildly to Rishi Sunak’s speech yesterday. In it, he said that the government will extend some of its pandemic policies for a few months. For example, the furlough program will continue until September while the stamp duty holiday will continue for another three months. 

Meanwhile, the pair will also be affected by the actions of the US dollar. Later today, Jerome Powell will deliver a speech at a conference organised by the Wall Street Journal. In it, he will talk more about the actions that the bank is expected to take if Treasury yields keep rising. 

Also, the GBP/USD is possibly holding tight as forex traders wait for the US nonfarm payroll numbers. Economists expect that the data will show that the economy added more than 180,000 jobs last month while the unemployment rate declined to 6.1%. 

GBP/USD analysis

The GBP/USD pair has been in a consolidation zone in the past few days. It is trading at 1.3940, which is 2% below the highest point this year. The price also seems to be forming a bearish pennant pattern on the four-hour chart. The Average True Range (ATR), which is a measure of volatility has also declined. Therefore, the pair may break-out lower in the near term.