GBP/USD crawls higher as UK car sales tumble by 97%; PMI data eyed
The GBP/USD pair rose in early trading as the market waited for a busy data day. The pair also rose because of the overall weakness of the US dollar, which has dropped by about 5 basis points.
GBPUSD rises amid a collapse of auto industry
The British pound rose even after the Society of Motor Manufacturers and Traders (SMMT) released bleak data from the country. The number showed that new car sales tumbled by about 97% in April as most sellers shut their businesses.
About 4,000 new cars were registered in the month. This was the lowest reading since the second world war. Worse, the association said that it expects about 1.6 million registrations this year. This is down from the 2.31 million that were registered a year ago.
The auto sector is an important part of the UK economy. It employs thousands of people directly and indirectly. Data from SMMT shows that more than 128k people are employed directly in the automobile sector. More than 823k people are also employed in other sections of the sector. Also, the sector brings more than £82 billion to the economy. Therefore, a contraction will be felt by the economy.
UK Services and construction PMI eyed
The market is next eying the services, construction, and composite PMI data from the UK. These numbers are important because they represent more than 90% of the total economy. Analysts expect the services PMI to contract to a record 12.2 and the composite PMI to fall to a record low of 12.9. Meanwhile, analysts polled by Refinitiv expect the construction PMI to have increased to 44.0 in April.
On the four-hour chart, the GBPUSD pair has been falling since Friday, when it peaked at 1.2642. However, the pair has now started moving upwards mostly because of the dollar weakness. Still, this price actions seems like a bearish flag, which is a sign that the pair will continue moving lower. If it does, the bears will first need to retest the 23.6% retracement level at 1.2350.
On the flip side, this prediction will be stopped if the pair manages to move past the Friday high of 1.2642. This movement will mean that there are more buyers in the market who will be keen to push the price higher.