Pound Crushed As Scottish Fear Escalated

One of the biggest losers of this week is turning out to be the British pound. The British pound hammered yesterday, as the GBPUSD pair traded below the 1.6500 support area. One the main reason for the decline in the British pound was the rising fears of the Scottish Independence. A major poll suggests a major trend in favor of the Scottish Independence. This raised the eyebrows of many traders and as a result the British pound crushed severely not only against the US dollar, but also against the Swiss franc and the Euro. Moreover, there were a few other important releases scheduled during the last two days in the UK, including the UK manufacturing PMI and the construction PMI. Let’s have a look at the details of the releases.

UK Manufacturing PMI
The first in the line was the UK Manufacturing Purchasing Managers Index (PMI) which was released by both the Chartered Institute of Purchasing & Supply and the Markit Economics during Monday’s London session. The forecast was slated for a rise from 54.8 to 55.0. However, the outcome was on the disappointing side, as the UK manufacturing PMI fell to 52.5 from 64.8. The report pointed out weakness and mentioned that the upturn in the UK manufacturing slowed further. The overall impact of the outcome was bearish for the British pound.

The British pound traded lower after the release, and washed the gains which the GBPUSD pair managed to register before the manufacturing PMI release.

UK Construction PMI
Yesterday, the UK Manufacturing Purchasing Managers Index (PMI) was released by both the Chartered Institute of Purchasing & Supply and the Markit Economics during the London session. The forecast was slated for a decline from 62.4 to 61.4. However, the outcome was very positive, as the UK construction PMI jumped to 64.0, which is the fastest overall increase in output levels since January. Moreover, the report also mentioned that there were strong contributions from all three broad areas of construction in August. This can be seen on the positive side.
However, the reaction from the British pound traders was surprising, as they completely overlooked the construction PMI. The fear of Scottish independence was driving the currency lower.

US ISM Manufacturing PMI
There was an important economic release lined up during the New York session yesterday. The US Institute for Supply Management (ISM) Manufacturing Index was released. The forecast was slated for a small decline. However, the outcome exceeded the expectation, as the US ISM manufacturing PMI came in at 59.0, up from the previous reading of 57.1. This further added pressure on the GBPUSD pair, as it fell below the 1.6500 support area after the release.

Technically, the GBPUSD pair broke an important support level of 1.6560-50. This particular break has opened the door for further downside acceleration in the short term. The next level of interest can be seen around the 1.6420 level. On the upside, the broken support might act as a resistance for the pair moving ahead.

So, keep an eye on all the important levels friends and trade accordingly.

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