GBP/USD: Trading the UK Services PMI

UK  Services PMI (Purchasing Managers’ Index) is  based on a survey of purchasing managers in  the  services 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.

Services PMI  remains above the 50-point line, pointing to expansion in the services sector. The index  improved in  March to 53.7 points, close to the forecast. Little change is expected in the April report, with an estimate of 53.6 points.

Sentiments and levels

The pound has looked sharp in recent weeks, but it’s been more of a case of broad dollar weakness rather than strong UK numbers. Will we see a downward correction? With the Federal Reserve out of the spotlight, the  markets will be focusing on fundamentals, and the dollar could rebound if the US employment numbers remain robust.  So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.4752, 1.4635, 1.4562, 1.4413, 1.4297  and  1.4148.

5 Scenarios

1. Within expectations: 50.0 to 57.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 57.1 to 61.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 61.1: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations:  44.0 to 49.9: A  reading showing contraction  could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 44.0: A reading  pointing to  significant contraction would  push  the pair  below a second support level.

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