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GBP/USD: Trading the British Services PMI Jul. 2015

The British  Services PMI (Purchasing Managers’ Index) is  based on a survey of purchasing managers in  the  services sector. Of the three British PMI reports, Services PMI is considered the most important.  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 Friday at 8:30 GMT.

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends.

Services PMI  continues to post  readings  well above the 50 level, pointing to continuing expansion in the services sector. However, the  May release  slipped to 56.5 points, short of the estimate of 59.2 points. The markets are expecting a rebound  in the  June report,  with an estimate of 57.4 points.

Sentiments and levels

After a strong rally for most of June, the pound posted sharp losses last week.  The FOMC may be slightly more hawkish than perceived, as a Fed policymaker spoke of one or even two rate hikes in 2015. If there are further hints about a rate hike in the US, the greenback could jump higher.  As well,  the  severe crisis over Greece’s  debts  is weighing on the pound, as the UK has close economic and political ties with the continent.  So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5909, 1.5746, 1.5682, 1.5590, 1.5485 and 1.5341.

 

5 Scenarios

  1. Within expectations: 54.0 to 61.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 61.1 to 65.0: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 65.0: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
  4. Below expectations:  50.0 to 53.9: A sharper decrease than forecast could  push GBP/USD downwards  and break  one level of support.
  5. Well below expectations: Below 50.0: A  reading pointing to contraction could push the  pair downwards, possibly breaking a second support level.

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

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.