Home GBP/USD: Trading the UK Construction PMI January 2 2013

GBP/USD: Trading the UK Construction PMI January 2 2013

The British Construction PMI Index is based on a survey of Purchasing Managers in the UK construction industry. The survey includes about 170 respondents, who are surveyed for their view of a wide range of business conditions, including employment, new orders, prices and inventories. 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 9:30 GMT.

Indicator Background

The UK Construction PMI continues to post readings very close to the 50 point threshold, the index has been a disappointment, with three of the four most recent readings  below the 50 point level.  This indicates a lack of expansion in the UK construction industry. In December the PMI  came in at 49.3 points, below the forecast of 50.7. The markets are expecting a similar reading in the January release, with an estimate of 49.6 points. Will the index surprise the market and cross back over the 50 line?

Sentiments and levels

US lawmakers brought in the new year with a last-minute agreement on fiscal cliff, boosting market sentiment and pushing the pound higher against the dollar. Although budget talks will continue, the good news is that the agreement should protect the US economy from falling into a recession. So, the overall sentiment  has  shifted from neutral to bullish  on GBP/USD towards this release.

Technical levels, from top to bottom: 1.66, 1.6475, 1.6343, 1.6247, 1.6123 and 1.6060.

5 Scenarios

  1. Within expectations: 47.0 to 53.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 53.1 to 56.0: An unexpected higher reading can send the pair well above one resistance line.
  3. Well above expectations: Above 56.0. The likelihood of a sharp expansion is low. Such an outcome could prop up the GBP, and a second resistance line might be broken as a result.
  4. Below expectations: 43.0 to 45.9: A sharper decrease than forecast could push the pair below one support level.
  5. Well below expectations: Below 43.0: A reading below the 50 point level would indicate contraction in the construction sector for the first time in over a year. This could push downwards on the pound, and GBP/USD could break a second support level.

For more about the GBP, 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.