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UK Services PMI Impress: GBP/USD Reaction

UK Services PMI for August came in at a 10-month high. The headline reading was 60.5, up from the 59.1 in July, and beating forecasts for a decline to about 58.6. This makes it the 20th month of services expansion.

UK Services PMI 


(source: Markit)

- There was continuing rise in new business.
- Hiring continued.
- Business confidence dropped to a 15-month low.

The increase in activity in the service sector reflect a strong domestic economy. However, recent manufacturing data has suggested weakness from the outside - less demand for UK's exports for example. The surprising services PMI reading probably won't have much impact on tomorrow's BoE monetary policy decision. 
The GBP/USD did find support before the data point and rallied slightly after the release, but the rally will probably be brief as price still holds below 1.65:

GBP/USD 4H Chart

(click to enlarge)

The 4H chart shows a persistent bearish market. A break above 1.66 will be needed to introduce any consolidation/correction scenario. For now, price looks bearish, with downside risk toward the 2014-lows in the 1.6250-1.63 area.