GBP/USD Trading the British Manufacturing PMI

GBP/USD Trading the British Manufacturing PMI

The British Manufacturing PMI (Purchasing Managers’ Index) is   based on a survey of purchasing managers in  the manufacturing 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 9:30 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.

The index  recorded a reading of 52.1 in January, the first time the index was above the important  50 level since November 2011. The market forecast for  February is for a similar reading, of 51.9. This would indicate some very modest growth in the hard-hit UK manufacturing sector.

Sentiments and levels

The pound has been able to shrug off weak economic news coming out of the UK, but how long can this last? The pair has moved  upwards a spectacular  six  cents in 2012, so  a correction of some kind  is overdue. At the same time, investors and traders don’t seem to bothered by the sluggish UK economy.  Thus, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6265, 1.6132, 1.6065, 1.60, 1.59, 1.5775, and  1.5720.

5 Scenarios

  1. Within expectations: 49.0 to 55.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 55.1 to 58.1: An unexpected higher reading can send the pair well above one resistance line.
  3. Well above expectations: Above 58.1: Given the  ongoing weakness in  the manufacturing sector, 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:  45.9 to 48.9: A sharper decrease than forecast could  push GBP/USD downwards  and break  one level of support.
  5. Well below expectations: Below 45.9: A  reading deep in negative territory  would indicate substantial contraction in the manufacturing sector. This 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.