UK services PMI preview: What to expect of GBP/USD?

The UK economy will release its September services PMI later in the European session at 0830GMT, which is forecast to tick lower from August’s 59.9 to 52.0 last month. 

The business activity in the UK’s services sector is expected to stall its previous rebound and edge lower in Sept. The index had slumped to an 88-month low of 47.4 in July, in light of increased uncertainty post Brexit-vote.

A weaker PMI print is likely to exacerbate the pain in the GBP/USD pair, sending it further towards 1.26 handle, while a positive surprise may offer much-needed respite to the GBP bulls, sending the rate back beyond 1.2750 levels.

Analysts at TD Securities noted, “The services sector continues to remain in relatively healthy shape following the referendum, and until Article 50 is triggered then we should continue to see relatively stable growth in the sector, which represents 80% of the UK economy.”

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 10 and 45 pips in deviations up to 3 to -2, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.

Haresh Menghani, Analyst at FXStreet notes, “With short-term indicators already pointing to oversold conditions, the pair is witnessing a rebound from a descending trend-channel support on 4-hourly chart. However, any recovery from near-term oversold conditions might now confront immediate resistance near 1.2760-70 region above which a bout of short-covering could assist the pair beyond 1.2800 handle, towards another strong resistance near 1.2840 area.”

“Meanwhile on the downside, the descending trend-channel support, near 1.2700 region, might continue to limit any immediate downslide. However, failure to hold this immediate strong support would turn the pair vulnerable and trigger a fresh leg of depreciating move for the pair.”