GBP/USD Moves Higher on Strong Services PMI

Tuesday, 05 April 2011 06:56

The pound gained momentum after the UK Services PMI beat analysts’ expectations to reacheits highest level in thirteen months, on Tuesday.

The Chartered Institute of Purchasing and Supply announced a services PMI of 57.1 for the month of March — much higher than the expected 52.5.

The services PMI is an index that represents the results of a survey of UK managers from businesses operating in the services sector.

The services sector showed an exceptional growth for March due to improving business conditions in the UK. The PMI report also revealed a rise in employment for first time in nine months.

On the negative side, the level of confidence for future months decreased, which questions the industry’s capacity to maintain the same growth rates.

According to Paul Smith, Senior Economist at Markit, the strong PMI results improves UK’s first quarters GDP expectations: “Allied to a robust underlying growth trend in manufacturing and the recent improvement in construction, we look for GDP in Q1 to have rebounded by as much as 0.8% on a quarterly basis in the first quarter”.

The GBP/USD reacted well to the data by breaking above its tight range. The pair broke the 1.6170 short term resistance level and is heading with momentum to the 1.6287 level.