GBP/USD retreats as UK manufacturing PMI misses

British pound lost ground against the US dollar on Friday, after a report showed that manufacturing activity in the United Kingdom slowed down a bit more than projected in October, while speculation that the Federal Reserve Bank may begin paring back its stimulus program sooner than anticipated continued to provide support to dollars demand.

GBP/USD fell to a session low at 1.5989 at 7:20 GMT, also the pairs lowest point since October 17th, after which consolidation followed at 1.5998, down 0.24% for the day. Support was likely to be received at October 17th low, 1.5941, while resistance was to be met at October 29th high, 1.6144.

According to data by Markit Economics in cooperation with the Chartered Institute of Purchasing and Supply (CIPS), the index, gauging activity in the sector of manufacturing in the United Kingdom, slowed down to a reading of 56.0 in October, as in September it came in at 56.3, a revision down from 56.7 previously. Analysts had projected that the index will fall less to reach 56.4. Values above the key level of 50.0 are an indication that activity in the sector has increased. Despite this result, manufacturing sector in the country continues developing steadily in the beginning of the fourth quarter of the year, as the sub-index of new orders remains at considerably high levels. New orders climbed almost at the fastest pace in the past 19 years in October, as the record peak has been reached this August. The sub-index of employment rose for the sixth consecutive month in October. According to Markit, British manufacturing has been expanding at a quarterly rate of 1.0-1.5%.

US dollar, meanwhile, received steady support yesterday, after the Federal Reserve Bank decided to maintain the current pace of its asset purchases unchanged at its policy meeting, as widely anticipated, because more evidence of an improving economic activity was to be obtained. The US central bank left without change its statement that it will probably maintain the benchmark interest rate close to zero at least as long as the rate of unemployment in the country is above 6.5% and as the inflation outlook is not exceeding 2.5%.

Elsewhere, the sterling gained 0.2% against the euro, with EUR/GBP cross reaching 0.8452 earlier on Friday, which was pairs lowest level since October 21st. At 9:07 GMT EUR/GBP was losing 0.15% for the day to trade at 0.8459. The common currency was still under pressure, as weak CPI data released out of the Euro zone yesterday may urge the European Central Bank to cut its benchmark rate. GBP/JPY pair was falling 0.37% on a daily basis to trade at 157.24 at 9:10 GMT. The pound has appreciated 4.2% during the past six months, or the best performing currency among the 10 developed-nation currencies, which are tracked by Bloomberg Correlation-Weighted Indexes. The US dollar has risen 1%, while the euro has climbed 3.9% during the same period.