Global macro overview for 05/07/2017

Global macro overview for 05/07/2017:

The UK Construction PMI deteriorates below the consensus in June. Market participants expected the PMI Construction to decline from 56.0 points to 55.0 points, but it slid below market expectations to the level of 54.8. Moreover, the growth momentum softened across all sectors during the month and the worst performers were commercial and civil engineering sectors. Only the residential housing growth was the highest since December 2015.

Today's Services PMI was as well slightly worse than expected as it was released at the level of 53.4, while market participants expected it at the level of 53.6, which was already lower than last month figure of 53.8. The PMI is still above the fifty level, but this is the weakest growth for 4 months anyway. On the positive note, there was a slight pickup in the pace of job creation in June to its fastest for 14 months.

What is even more important, there were first reports of delays in new business on the back of fresh political and economic uncertainties, which in turn resulted in a decline in business confidence to the lowest levels in 2016 (business expectations were at 63.7 vs 68.1 previously). The beginning of the Brexit negotiations, which outcome is another uncertainty, added another factor that would test the resilience of the British economy. Despite the negative public mood just after the Brexit vote, the UK economy did not collapse and performed on a subdued, but steady pace of progress. Nevertheless, the dark cloud starts to gather over the UK and worse than expected negotiations outcome might decrease the negative economic outlook event further.

Let's now take a look at the GBP/USD technical picture on the H4 time frame after the data was released. The price of GBP/USD has broken below the intraday support at the level of 1.2912 and now is moving towards the next technical support at the level of 1.2861. There is still a possibility that the price will bounce from the golden trend line support around the level of 1.2880.