At the bottom of the hour we have the Markit/CIPS UK construction PMI. The headline number is expected to drop to 62.0 from 62.6. Given that we’ve been seeing some of the data soften of late there’s a good chance that the market may be looking for disappointment here as well.
Construction was the first big indicator to show sustained growth at the start of the recovery last year and it has remained strong throughout. There’s no signs that housing construction is slowing in any meaningful way and the other sectors are looking strong too.
The pound is under some selling pressure at the moment and any positive number might be well sold into. If we get a worse than expected number then we may see the sellers try to kick it down through 1.6800.
Given that some of the steam has come out of the dollar rally in USD/JPY, the fact cable hasn’t bounced alongside the euro means the bears are in control, but this might give us a good opportunity into the the release of the next MPC minutes two weeks after the meeting on Thursday.
The pressure is going to start mounting as to when the first votes are going to go in favour of a rate hike. While this might not change the consensus for when rates will eventually start to rise, the first change in vote is likely to see a jump in the pound.
I’m still liking the 1.6700 level to start scaling in some longs and more poor data will give the pound a good shove towards it. August may be a little too early to start looking for a change in sentiment at the MPC but it might be close enough for some to think about voting for a rate rise. In that sense I see a low risk opportunity to start front running that idea.
There’s still some water to flow under the bridge until the minutes are released by if I don’t get better levels now I’ll look to take a long into the minutes on the day.
In the meantime GBP/USD is finding support ahead of 1.6800 and there’s going to be some more at 1.6780/85. Above, there’s mild resistance at 1.6840, 1.6860 and stronger at 1.6890/95
