UK Manufacturing PMI indicates economic slowdown; Sterling under pressure

The GBP/USD has been slid to 0.44% to 1.5200 from around 1.5268 after manufacturing PMI data printed at 52.0 which is below forecast at 52.7 level.

The sterling dipped to a new three weeks lows against the dollar on earlier Monday after the UK manufacturing sector data was likely to expand at a slower than expected rate last month adding to concerns that the economy is losing momentum.

Prospects of a steep rebound in UK economic growth during Q2 of the year has been in the centre of the news after this data release.

Manufacturing appears to be on the course to proceed as a slight drag on the economy as the sector is hit by the combination of the strong pound and weak business investment.

Technical watch:

The steep slump in this pair is evidenced when mainly by the last week's bearish engulfing pattern candlestick breached the lower trend line at 1.5514 levels.

Even at the current juncture we don't see any traces of bounce backs as downtrend seems to be intact.

RSI (14) is converging with downward price line at 41.4066 levels. This means relative strength in decline of this pair remains still stronger.

Currency Derivatives Basket: Put ratio Spread or Short Futures.

Hedge through buying a Put Ratio Spread expecting increased volatility.

Buy with the combination of Bear Put Spread and more naked puts.

To execute this strategy, buy a Put (At-The-Money) and sell more Puts (Out-Of-The-Money) at a lower strike price in ratio of 1:2 or 1:3 for net credit.

Use Short time (This month contact) to expiration to take advantage of time decay in short positions and not to give underlying currency much time to move lower.

Margin is required to take short Put positions.

Or

Since we are sensing the increasing volatility in downtrend and slowdown in UK's economic growth, with house money we could see some shorting opportunities of GBP/USD futures for daily traders at current levels.