GBP/USD: Trading the UK Manufacturing PMI

The British Manufacturing PMI (Purchasing Managers’ Index) is  based on a survey of purchasing managers in  the manufacturing sector. Respondents are surveyed for their view of the economy and business conditions in the UK.  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 Thursday 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.

The index  dipped slightly in the August reading,  coming in at 51.5 points. This was  short of the estimate of  51.9  points, but still indicative of  slight growth in  the manufacturing sector.  The market forecast for  September is 51.3 points.

Sentiments and levels

The US dollar had its way with the pound last week, and the pound remains under pressure. The markets have not given up on a Fed rate later this year, and the dollar could jump again if there are any hints about a rate hike. Still, the pound could recover ground as British Current Account beat expectations and Manufacturing PMI  will be released later this week. 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: 48.0 to 54.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 54.1 to 58.0: An unexpected higher reading can send the pair well above one resistance line.
3. Well above expectations: Above 58.0: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations:  43.9 to 47.9: A sharper decrease than forecast could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 43.9: A  reading deep in negative territory  would indicate contraction in the manufacturing sector. This would likely push the  pair downwards, possibly breaking a second support level.

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