Cable failed to sustain gains above 1.2900 both Wednesday and yesterday, settling to the upper 1.28s. The pair was showing a 0.6% week-on-week gain as of the early London session on Friday, which follows a decline of over 1.5% last week. We would look to fading gains into next Thursday’s general election in the UK, which has suddenly become a closer call than pretty much any pundit would have believed until last week. One poll has even showed risk for there being a hung parliament, though most indications suggest that the ruling Tory Party will win. The political developments follow last week’s unexpected downward revision in UK Q1 GDP data to 0.2% q/q, which compares to growth in the U.S. of 0.7% q/q and of 0.5% in the Eurozone. Much attention will be on the UK’s services PMI, due out on Monday, as the key sector (accounting for nearly 80% of the economy) drove GDP growth lower in Q1.
The UK May construction PMI unexpectedly improved to a reading of 56.0 from 53.1 in April. The median forecast had been for a drop o 52.5. A sharp rise in residential construction projections, which rose at its highest rate since December 2015, underpinned the headline rise, though respondents stressed that economic uncertainty was still curtailing client spending. The focus on the services reading likely explains the limited market impact that either yesterday’s manufacturing PMI, or today’s construction sector survey, have had.
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