GBP/USD: Trading the British Manufacturing Oct 2015

British Manufacturing Production, a key indicator, provides analysts and traders with a snapshot of the health of the UK manufacturing sector. A reading which is higher than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Wednesday at 8:30 GMT.

Indicator Background

British Manufacturing Production indicator measures the changes in output produced by manufacturers and in the turning of inventory. Manufacturing is a critical sector of the economy, and a strong reading  is an indication of economic growth.

The indicator has struggled, posting three declines in the past four readings. In July, the indicator disappointed with a reading of -0.8%, compared with an estimate of +0.2%. The markets are expecting a turnaround in the August release, with an estimate of +0.4%.

Sentiments and levels

Despite  dismal job numbers out of the US last week  and a strong British Construction PMI, the pound couldn’t make any headway against the US dollar. The negative effect of the weak US Nonfarm Payrolls could extend into this week, but monetary divergence continues to favor the US dollar. So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5341, 1.5269, 1.5163, 1.5026, 1.4856 and 1.4752.

5 Scenarios

1. Within expectations: 0.1% to 0.7%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.8% to 1.2%: A strong reading can send the pair above one resistance line.
3. Well above expectations: Above 1.2%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome  would likely  prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations: -0.3% to 0.0%:  A reading at the zero line or in negative territory could see GBP/USD could lose one level of support.
5. Well below expectations: Below -0.3%: A very poor reading  would likely push  the pair downwards, possibly breaking a second support level.

For more about the pound, see the GBP/USD forecast.