GBP/USD: Trading the UK Services PMI

UK  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 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.

Services PMI  has been steady, pointing to expansion in the services sector. The index was  almost unchanged in January, with a reading of 55.6 points. The estimate for the February report stands at 55.1 points.

Sentiments and levels

In the US,  recent figures have shown improvement, so the economy may be back on track after a lukewarm start to 2016. The British economy has not kept up, hobbled by very low inflation and hurt by a languishing Eurozone economy. The pound posted huge losses last week and has fallen below the symbolic level of 1.40. So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.4227, 1.4135, 1.40, 1.3809, 1.3678  and  1.3514

5 Scenarios

1. Within expectations: 52.0 to 59.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 59.1 to 63.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 63.1: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations:  48.0 to 51.9: A  weaker reading  than forecast could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 48.0: A reading showing significant contraction would likely push the  pair downwards, possibly breaking a second support level.

For more about the pound, see the GBP/USD forecast.