UK Services Purchasing Manager Index is a very good and very tradable release for GBP but the market will surely be following the overall USD trend and the aftermath of BOE’s rate decision the day before. If we do not see a conflicting release, i.e. going against the market trend, I’d take a short trade for a quick profit, knowing fully well that Nonfarm Payroll is coming up in just a few hours.
4:30 am (NY Time) UK Services PMI Forecast 53.3 Previous 53.6
Deviation: 2.5 (BUY GBP 55.8 / SELL GBP 50.8)
The Services PMI is tradable with a minimum deviation of 2.5 between the forecast and the actual release. If we get at least 55.8 or better, we could see some demand in the GBP and we will consider BUYING GBP against weaker currencies. If we get a 50.8 or lower, GBP could weaken and we should look to SELL GBP against stronger currencies.
I’d recommend using the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: GBPUSD.
Outlook Score
Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is an opposite.
DEFINITION
The Chartered Institute of Purchasing and Supply (CIPS) Services Purchasing Manager´s Index (PMI) measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation´s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because of purchasing managers, by virtue of their jobs, have early access to data about their company´s performance, which can be a leading indicator of overall economic performance.
By Henry Liu