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.
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 December release came in at 55.5 points, almost matching the forecast. More of the same is expected in the January report, with the estimate standing at 55.4 points.
Sentiments and levels
The Federal Reserve was cautious in tone in the January statement, so the markets will now look for hints as to a possible March hike. With this in mind, any positive US data could bolster the US dollar. Inflation levels remain very soft in the UK, and a weak Construction PMI is putting pressure on the pound. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.4635, 1.4562, 1.4346, 1.4227, 1.4135 and 1.40
5 Scenarios
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.
Above expectations: 59.1 to 63.0: An unexpected higher reading can send the pair above one resistance line.
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.
Below expectations: 48.0 to 51.9: A weaker reading than forecast could push GBP/USD downwards and break one level of support.
Well below expectations: Below 48.0: A reading showing significant contraction would likely push the pair downwards, possibly breaking a second support level.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
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