The 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.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Tuesday at 8:30 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 was a disappointment in May, falling by 0.7%. The markets are forecasting better news in July, calling for a very modest increase of 0.1%. Will the indicator bounce back into positive territory this month?
Sentiments and levels
GBP/USD exhibited a steady downswing this past week, and we could see the trend continue. The implementation of QE3 by the BOE underscores the weak UK economy, and nervous markets could spell further trouble for the pound, as investors eye safe havens like the US dollar. Thus, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5750, 1.5648, 1.56, 1.5521, 1.5415, 1.5309 and 1.5229.
5 Scenarios
- Within expectations: -0.1% to 0.3%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 0.4% to 0.6%: A strong reading can send the pair well above one resistance line.
- Well above expectations: Above 0.6%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome would prop up the GBP, and a second resistance line might be broken as a result.
- Below expectations: -0.4% to -0.2%: A reading in negative territory could cause the GBP to lose one level of support.
- Well below expectations: Below -0.4%: A very poor reading could push the pair downwards, possibly breaking a second support level.
For more about the pound, see the GBP/USD forecast.
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