GBP/USD Trading the British Manufacturing PMI

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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 Wednesday 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.

Manufacturing PMI has been under the 50 point level since May, although it did improve in June to 48.6 points. The market forecast is almost unchanged, with an estimate of 48.7 points. Another reading below the 50 level is indicative of contraction in the manufacturing sector.

Sentiments and levels

Since June, GBP/USD has had difficulty holding onto any gains for an extended period. The British economy continues to be weak sputtering, and investors may seek the safe haven of the US dollar if the turmoil in the Euro-zone continues. Thus, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5930, 1.5805, 1.5750, 1.5648, 1.56 and 1.5521.

5 Scenarios

  1. Within expectations: 45.0 to 51.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 51.1 to 54.1: An unexpected higher reading can send the pair well above one resistance line.
  3. Well above expectations: Above 56.1: 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: 41.9 to 44.9: A sharper decrease than forecast could push GBP/USD downwards and break one level of support.
  5. Well below expectations: Below 41.9: A reading deep in negative territory would indicate further 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.

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About Author

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.

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