Sterling is under-performing and Cable is trading at its lowest since mid-Jan. UK PMI data weakened unexpectedly, weighing on GBP sentiment, with services activity dropping to 53.3 in Feb, from 54.6 in Jan. Markets expected a shallower deceleration to 54.1. The big downside miss reflected weaker consumer spending on services, the ISM reported, suggesting that higher prices are compromising consumer activity.
Cable retains a weak undertone. Loss of support at 1.2265 (50% Fib retracement of the Jan/Feb rally) points to additional losses to the mid 1.21 area (76.4% retracement at 1.2161). Trend signals are aligned bearishly across a range of time frames, which should limit upside scope for the GBP to the mid/upper 1.22 area now; we expect continue expect the GBP to extend its current retracement back to the Jan low (1.1993) in the next few weeks. Sell minor GBP rallies.