New Lockdown Measures Shrink UK’s Economy 

 

In November, business activity in UK has contracted due to a new wave of coronavirus that affected the huge services industry, but news of possible vaccines in early 2021 boosted hopes of businesses in UK as shown on a survey on Monday.  

The HIS Markit/CIPS UK Composite Purchasing Manager’s Index (PMI), fell to a 5-month low of 47.4 in November 52.1 in October. 

It is the first time the index has fallen below the 50.0 growth threshold level since June. 

The decline was smaller than a slump to 42.5 forecast in a Reuters poll of economists, however, and less severe than the drop in the eurozone. 

The progress of the vaccines boosted the component of the PMI that hit its highest in more than five years. 

On Monday, Bank of England Chief Economist Andy Haldane said he hoped the economy to “turn a leaf” next year, but warned of an inevitable long-term damage. 

After Prime Minister Boris Johnson imposed the 4-week lockdown, Britain’s economy is widely expected to contract in the fourth quarter. 

Restrictions in other parts of United Kingdom are also imposed in sectors of hospitality and indoor activities. 

Those closures helped to push the services PMI to 45.8 from 51.4 in October. 

But manufacturing, which was largely unaffected by the latest lockdown, accelerated, with its PMI rising to 55.2, the joint-highest level since 2018. 

“The two-speed nature of the recovery is increasingly clear,” J.P. Morgan Asset Management strategist Hugh Gimber said. “The manufacturing sector continues to tick along at a healthy pace, while new lockdowns have slammed the brakes on the nascent recovery in the service sector.” 

 

Technical Outlook 

 

In the daily charts of GBP/USD, the pair edged higher early Wednesday morning in Asia session. 

As what we can see in the chart, the pair is still being support by the resistance level at 1.31776. Due to the weakening of the dollar and the optimism in the COVID-19 vaccine and Brexit deals, we may expect the sterling to test the resistance level at 1.34766 in the coming days. Possible breakout from this resistance level will record a new high from the sterling for the year. 

However, if the price will fall from, we may expect the pair the re-test the support level at 1.31776 before falling further. 

If the price will break down from the support level at 1.31776. we may expect the pair to fall further and test the support level at 1.26885. 

 

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