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British Manufacturing Production, a key indicator, provides analysts and traders with a snapshot of the health of the UK manufacturing sector. A reading which is higher than the market forecast is bullish for the pound.

Update:  UK manufacturing output beats expectations

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Tuesday 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 rebounded strongly in December, posting a gain of 0.7%. This beat the estimate of 0.4%. The markets are expecting a weaker gain in the January report, with an estimate of 0.3%.

Sentiments and levels

US employment numbers have been positive, allaying concerns that the economy might not be strong enough to withstand a rate hike later in the year. Expectations for a rate hike in the UK are muted, as inflation remains on a downward trend. Last week’s British PMIs point to continuing expansion of the UK economy. So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5625, 1.5539, 1.5416, 1.5290, 1.5114 and 1.5008.

5 Scenarios

  1. Within expectations: 0.0% to 0.6%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.7% to 1.1%: A strong reading can send the pair above one resistance line.
  3. Well above expectations: Above 1.1%: The likelihood of a sharp 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 -0.1%:  In such a scenario,  GBP/USD could lose one level of support.
  5. Well below expectations: Below -0.5%: A very poor reading  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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