The UK PMIs overview
The first Preliminary readings of the UK Manufacturing and Services PMIs are due for release today at 0930GMT.
The Preliminary UK Manufacturing PMI is expected to show that the pace of contraction in the activity slowed in January after the PMI hit a four-month low in December. The index is expected to arrive at 48.9 versus 47.5 last.
Meanwhile, the flash UK Services PMI is expected to rise to 51.0 in January vs. 50.0 booked in December.
How could they affect GBP/USD?
The Cable broke the Asian consolidation phase to the upside and reached a fresh daily high at 1.3139 in the last hours, as markets cheer the latest media reports that the UK is likely to clinch its first post-Brexit trade deal with Japan. The immediate focus now shifts towards the UK Manufacturing PMI data release.
Should the data surprise markets to the downside, it would bolster BOE rate cut expectations and knock-off the spot back below 1.3100, below the next supports are aligned at 1.3057 (50-DMA) and 1.3034 (Jan 22 low).
However, on upbeat readings, the GBP/USD pair could take-out the key 1.3154/55 resistance, above which 1.3170 (Jan 8 high) could be tested en route 1.3200 (round number).
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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