The UK PMIs overview
Monday's UK economic docket highlights the Preliminary readings of the UK Manufacturing and Services PMIs, due at 09:30GMT. The UK Manufacturing PMI is expected to register a modest rebound, though remain in the contraction territory at 49.4 for December as compared to the previous month's final reading of 48.9. Meanwhile, the UK Services PMI is also expected to edge higher to 49.6 during the reported month from 49.3 in November.
Analysts at TD Securities are also looking for a bit of improvement in the UK’s December flash PMIs and explained: “We look for the manufacturing PMI to rise from 48.9 to 49.4 (mkt 49.1), and for the services PMI to rise from 49.3 to 49.8 (mkt 49.5). The January numbers a month from now will be more significant, as they'll be the first ones that incorporate the general election results and the easing of political uncertainty. Some MPC members believe that a lifting of uncertainty will unleash a wave of pent-up demand, and BoE policy going forward will be highly data dependent.”
How could they affect GBP/USD?
Ross J Burland, Senior Analysts and Editor at FXStreet, offered his take on the GBP/USD major: “On a positive outcome, and so long as the week's other data for the UK is positive, based on an ATR of over 100 pips, while considering Octobers 145 pip ATR highs, bulls can target a break of 1.35 handle and recent highs of 1.3514 and hold above there. On the downside, the 21-day moving average is located in the low 1.30s which meet the 21 October highs of 1.3012 and S1 at 1.3305 as a key support area.”
Key Notes
• UK PMI Preview: GBP/USD bulls to target 1.35 handle on improved data
• GBP/USD: Recovery falters just shy of 1.3400 ahead of UK PMIs
• Chart of the week: GBP/USD bulls target a grind higher to 1.3850s
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 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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