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.
Update: UK manufacturing production slightly disappoints in August
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Tuesday at 8:30 GMT.
Indicator Background
The 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 strong readings are an indication of economic growth.
The indicator has been steady but not all that strong, with the past two readings coming in at 0.3%. Little change is expected in the upcoming release, with an estimate of 0.2%.
Sentiments and levels
The US dollar has surged higher against its major rivals as US numbers continue to improve. As well, market focus is shifting towards the timetable of an interest rate, as QE winds up. Meanwhile, UK numbers have softened and the anticipated rate hike may take place later rather than sooner. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.6250, 1.6131, 1.6006, 1.5909, 1.5746 and 1.5422.
5 Scenarios
- Within expectations: -0.1% to +0.5%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 0.6% to 1.0%: A strong reading can send the pair above one resistance line.
- Well above expectations: Above 1.0%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome could prop up the pound, and a second resistance line might be broken as a result.
- Below expectations: -0.6% to -0.2%: In such a scenario, GBP/USD could lose one level of support.
- Well below expectations: Below -0.6%: 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.
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