Home GBP/USD: Trading the UK Manufacturing Production

GBP/USD: Trading the UK Manufacturing Production

UK  Manufacturing Production, a key indicator, provides analysts and traders with a snapshot of the  strength of the UK manufacturing sector. 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 Wednesday at 9:30 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 struggling, posting three consecutive  declines, all of which missed expectations.  The markets are expecting an improvement in the  January report, with an estimate of 0.2%.

Sentiments and levels

The Federal Reserve  is unlikely to raise rates in March, but the bias remains towards tightening. This monetary divergence favors the US dollar. Although the US economy has experienced  a soft start to 2016, the employment picture is solid, and the most recent Nonfarm Payrolls report was well above expectations. So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.4562, 1.4346, 1.4227, 1.4148, 1.40 and 1.3901.

5 Scenarios

  1. Within expectations: -0.1% to +0.2%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.3% to 0.7%: A strong reading could send the pair above one resistance line.
  3. Well above expectations: Above 0.7%: The likelihood of a strong 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.
  4. Below expectations: -0.5% to -0.2%:  In such a scenario,  GBP/USD could lose one level of support.
  5. Well below expectations: Below -0.5%: A  sharp contraction  would likely push  the pair downwards, possibly breaking a second support level.

For more about the pound, 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.