When are the UK Preliminary PMIs and how could it affect GBP/USD?
|The UK PMIs overview
The first Preliminary readings of the UK Manufacturing and Services PMIs for May are due for release today at 0830GMT.
The Preliminary UK Manufacturing PMI is expected to show that the contraction in the manufacturing sector activity somewhat eased in May. The index is expected to arrive at 36.0 versus 32.6 last.
Meanwhile, the flash UK Services PMI is expected to recover to 25.0 in May vs. 13.4 booked in April.
How could they affect GBP/USD?
The Cable extends the break below the 1.2200 level, down 0.40% so far. The downside in the spot can be mainly attributed to the Bank of England (BOE) Governor Andrew Bailey’s take on the negative interest rates.
Meanwhile, the haven demand for the US dollar is on the rise across the board amid escalating US-Sino tensions, which adds to the losses in GBP/USD. The immediate focus now remains on the UK Manufacturing and Services PMI releases.
FXStreet’s Analyst, Haresh Menghani, offers key technical levels for trading GBP/USD in the day ahead.
“Some follow-through weakness below the 1.2180-75 region will reinforce the negative outlook and turn the pair vulnerable to accelerate the fall further towards the 1.2100 round-figure mark en-route multi-week low near the 1.2075 region. A convincing breakthrough might be seen as a fresh trigger for bearish traders and set the stage for a further near-term depreciating move towards challenging the key 1.2000 psychological mark.”
“On the flip side, any meaningful positive move back above the 1.2200 mark now seems to confront some fresh supply near the 1.2260 horizontal level and seems more likely to remain capped ahead of the 1.2300 mark,” Haresh adds.
Key notes
GBP/USD seen within 1.2100/1.2400 in the next weeks – UOB
Risk off as US – Sino tensions rise, PMI’s and US jobless claims
GBP hit as BOE re-ponders negative rates
About the UK PMIs
The Manufacturing Purchasing Managers Index (PMI) released by both the Chartered Institute of Purchasing & Supply and the Markit Economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the UK. A result above 50 signals is bullish for the GBP, whereas a result below 50 is seen as bearish.
The PMI service released by both the Chartered Institute of Purchasing & Supply and the Markit Economics is an indicator of the economic situation in the UK services sector. It captures an overview of the condition of sales and employment. It is worth noting that the UK service sector does not influence, either positively or negatively, the GDP as much as the Manufacturing PMI does.
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