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.
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 remains above the 50-point line, pointing to expansion in the services sector. The index improved in March to 53.7 points, close to the forecast. Little change is expected in the April report, with an estimate of 53.6 points.
Sentiments and levels
The pound has looked sharp in recent weeks, but it’s been more of a case of broad dollar weakness rather than strong UK numbers. Will we see a downward correction? With the Federal Reserve out of the spotlight, the markets will be focusing on fundamentals, and the dollar could rebound if the US employment numbers remain robust. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.4752, 1.4635, 1.4562, 1.4413, 1.4297 and 1.4148.
5 Scenarios
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Within expectations: 50.0 to 57.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
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Above expectations: 57.1 to 61.0: An unexpected higher reading can send the pair above one resistance line.
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Well above expectations: Above 61.1: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
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Below expectations: 44.0 to 49.9: A reading showing contraction could push GBP/USD downwards and break one level of support.
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Well below expectations: Below 44.0: A reading pointing to significant contraction would push the pair below 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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