UK Services PMI | Reaction in GBP

Jarratt Davis

Special Consultant to the FPA
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UK Services PMI will be released today 9:30am GMT. Any decent deviation in the data will cause a reaction in pound. However given the pounds recent resilience and cable at multiyear lows, a significant miss may be needed to convince traders to continue selling GBP at its current levels.

Description

The Services Purchasing Managers’ Index is a diffusion index based on surveyed purchasing managers in the services industry. The survey asks purchasing manager respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. Above 50.0 indicates industry expansion, below indicates contraction. Services PMI is a leading indicator of economic health because businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy.

Summary

The pound has weekend dramatically since the turn of the year as ‘Brexit’ fears have weighed heavily on sentiment with cable falling over 800 pips before finding support at 7 year lows. As such the pound has been rather resilient in recent days despite poor results from both the manufacturing and construction PMI’s. Services PMI is the most important of all 3 data points and is therefore likely to have the biggest impact should the data miss on expectations. Although from a fundamental perspective GBP maintains a slight bullish bias, with rate hikes remaining a distant possibility and market concerns regarding the UK’s EU referendum, the bias for GBP remains to the downside for the foreseeable future.

This release was also covered in the weekly risk events video. You can watch it here.

P.S. - If you want to learn more about how I trade, check out the link below

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