UK Manufacturing PMI Preview: What to Expect of GBP/USD?

UK Manufacturing PMI Preview: What to Expect of GBP/USD?

1 June 2016, 09:51
Roberto Jacobs

UK Manufacturing PMI Preview: What to Expect of GBP/USD?

The UK economy will release its May manufacturing PMI later in the European session. Markets expect the manufacturing PMI to tick higher to 49.9 from a sharp drop seen in April to 49.2 points.

Fears about Britain's EU referendum is likely to weigh on the British economy, driving the manufacturing sector activity at the slowest rate in almost three years. A minor-rebound expected in the PMI report may not be surprising given a sharp decline witnessed in April.

However, a negative surprise today could accentuate the offered tone surrounding the pound, sending cable lower towards 1.44 handle ahead of the construction and services PMI lined up for release later this week.

Analyst at CMC Markets UK noted, "The weak PMI readings seen in April have raised concerns that economic activity in Q2 could well stagnate as businesses hold back from new activity ahead of this month’s referendum vote. If we see similarly weak numbers for construction and services repeated in this week’s May numbers then we could well see speculation about a possible Bank of England rate cut start to get more airplay than at any time in the last twelve months." 

GBP/USD: Technical levels

At 1.4475, the immediate support might be located at 1.4430 (50-DMA) and below that 1.4400/1.4392 (round number/ daily S1). While the next resistance is located at 1.4550/58 (psychological levels/ daily pivot) and above which it could extend gains to 1.4582 (10-DMA).


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