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

UK manufacturing PMI for October due for release today is expected to show the pace of expansion in the activity slowed somewhat last month. The index is seen coming-in at 54.5 versus August’s 55.4 reading. 

UK manufacturing sector activity likely to deteriorate in Oct

An upside surprise in the manufacturing data would send the spot higher towards 1.23 handle. On the other hand, a weaker-than-expected figure could knock-off the GBP/USD pair back below 1.22 barrier.

A better print should offer some respite to the GBP bulls, which could further push back BOE rate cut bets until Feb 2017.

Analysts at TDS noted, “We look for the manufacturing PMI to gain further ground in October to 56.1 (mkt 54.4). While downside risks come from the flare-up of Brexit fears at the beginning of the month, we think that for the manufacturing sector in particular, this will be more than balanced out by the impact of the fall in GBP on the potential for export growth. Further upside in the PMIs will make for that much more spirited of a debate within the MPC for Thursday’s rate decision.”

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 50 pips in deviations up to 4 to -2, although in some cases, if notable enough, a deviation can fuel movements of up to 65 pips.

GBP/USD: Technical levels to watch

Haresh Menghani. Analyst at FXStreet explains, “On a sustained move above 1.2250 immediate hurdle is likely to trigger a short-covering rally and lift the pair immediately beyond 1.2300 handle towards its next major resistance near 1.2330 horizontal area.”

“Alternatively, renewed weakness back below 1.2200 handle would reinforce range-bound price-action and could drag the pair back towards the lower end of the trading range support near 1.2150, with 1.2200-1.2190 area acting as intermediate resistance.”