Home GBP/USD: Trading the British Construction PMI October 2011

GBP/USD: Trading the British Construction PMI October 2011

The British Construction PMI Index is based on a survey of Purchasing Managers in the construction industry, in which respondents are surveyed for their view of business conditions.  The index is a useful leading economic indicator, released during the first week of the month.

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

Published on Tuesday at 8:30 GMT.

Indicator Background

Since February 2011, the UK Construction PMI Index has been  higher than  50, indicating sustained growth in the construction industry. At the same time, the index has been on a slow but steady downward trend since June 2011.

Investors should take note that the forecasts for the last six readings have been very close to the actual readings. The forecast for October is 51.7. Will the forecast again be on the money, and will the downward trend continue?

Sentiment and levels

Many of the UK’s economic fundamentals, such as manufacturing, remain weak. Growth in Q2 was a  disappointing 0.2%. The economic news in the US is not much better, and thus the overall sentiment is neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5910, 1.5823, 1.5780, 1.5706, 1.5633 and 1.5530.

5 Scenarios

  1. Within expectations: 51.2 to 52.2: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 52.3 to 52.8: An unexpected higher reading can send the pair well above one resistance line.
  3. Well above expectations: Above 52.8: Given the recent downward trend of the index, the chances of a sharp expansion are low. Such an outcome would prop up the GBP, and a second resistance line might be broken as a result.
  4. Below expectations: 50.6 to 51.1: A sharper decrease than forecast could cause the GBP to drift and lose one level of support.
  5. Well below expectations: Under 50.6: A reading close to or below  50  would push the pair downwards, possibly breaking a second support level.

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

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.