GBP/USD: Trading the British Services PMI May 2015

The British  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 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.

The index continues to post figures  well above the 50 level, pointing to continuing expansion in the services sector. The  indicator improved to 58.9 points in March, well above the estimate of 57.1 points. The markets are expecting more of the same in the upcoming release, with an estimate of 58.6 points.

Sentiments and levels

The British election  is too tight to call, and the  uncertainty  could result in some volatility from the pair during the  week. Although US numbers have hit some turbulence, the dollar held its own last week against the pound.  So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5459, 1.53, 1.5215, 1.5114, 1.5008 and 1.4813.

5 Scenarios

1. Within expectations: 55.0 to 62.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 62.1 to 66.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 66.0: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations:  51.0 to 54.9: A  weaker reading than forecast  could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 51.0: A reading pointing to weak expansion or contraction in the services sector 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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