06.02.201802:00 Forex Analysis & Reviews: The pound falls against the background of poor data on the service sector

The European currency ignored good data on the composite PMI index of the eurozone but the British pound fell strongly against the US dollar in the first half of the day, after a weak report on the service sector.

According to the data, the growth rate of activity in the service sector of Germany for the month of January this year rose again and became the highest in almost seven years. Thus, the index of supply managers for the German services sector was revised upward to 57.3 points from the initial estimate of 57.0 points. The composite index was also revised to 59.0 points versus 58.8 points.

As noted in the IHS Markit, the index was positively influenced by the pace of creating new jobs in this sector of the economy.

The composite index of the MPI eurozone also slightly increased.

According to the research company, IHS Markit, the composite index of supply managers of the eurozone for the month of January this year rose to 58.8 points from 58.1 points in December. Initially, it was predicted that the index will be at 58.6 points. Markit expects that growth to continue in the future, which will positively affect the euro area's GDP in the first quarter of this year. Thus the GDP may reach 1% versus 0.6% in the fourth quarter of last year.

The technical picture in the EURUSD pair remained unchanged. The upside potential in the pair will remain until the moment of breakdown of support at 1.2430. A breakthrough at this level will move the trade in the wide side channel with the levels of 1.2390-1.2515. In case of successful consolidation above 1.2470, we can expect a larger impulse growth in the area of 1.2515 and 1.1560.

As noted above, the British pound collapsed against the US dollar after it became known that the UK's key services sector, namely its activity, slowed to a 16-month low in January.

According to the company, IHS Markit Ltd., the index of supply managers for the UK services sector fell to 53.0 points in January from 54.2 points in December. It is important to remember that a value above 50 indicates an increase in activity. Economists, on the contrary, were expecting an acceleration in activity growth compared to December.

As noted by Markit, the main pressure on the index was created due to the weakening growth in demand for services for companies and consumers.

As for the technical picture of the GBPUSD pair, today's decline may be limited by the support level in the area of 1.3990. However, the morning break of 1.4090 led to a complete reversal of the upward trend in the pound, which could be observed at the beginning of last week.