The Philadelphia Fed Manufacturing Index is an important leading indicator, and is based on a survey of manufacturers in the Philadelphia area. It examines manufacturers’ opinions of business activity, and helps provides a snapshot of the health of the manufacturing sector. A reading which exceeds the forecast is bullish for the British pound.
Indicator Background
The Philadelphia Fed Manufacturing Index measures regional manufacturing growth. The manufacturing sector is a vital component of the economy and the index is a useful gauge of the health and direction of the manufacturing sector.
The index bounced back smartly in February, climbing to 9.0 points. This easily surpassed the estimate of 4.2. The markets are expecting another solid release with the March estimate standing at 9.6 points.
Sentiments and levels
GBP/USD continues to send mixed messages, as the pair rebounded nicely last week after losses a week earlier. What should we expect this week? The pound’s fortune could well depend on the Claimants Count Change release, which has been looking sharp recently. In the US, employment numbers have been solid and an expected QE taper later this month is a dollar-positive event. So, the overall sentiment is neutral on GBP/USD towards this release.
Technical levels, from top to bottom: 1.7180, 1.6990, 1.6823, 1.6705, 1.66, 1.6475.
5 Scenarios
Within expectations: 6.0 to 13.0: In such a case, the pair is likely to rise within range, with a small chance of breaking higher.
Above expectations: 13.1 to 16.0: An unexpected higher reading can send GBP/USD below one support level.
Well above expectations: Above 16.0: The chances of such a scenario are very low. The pair could break below a second support line on such an outcome.
Below expectations: 3.0 to 5.9: A weak reading could push GBP/USD higher, and one resistance line could be broken as a result.
Well below expectations: Below 3.0: A very poor release would signal worsening conditions in the manufacturing sector. In this scenario, the pair could break through a second resistance line.
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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