GBP/USD: Trading the British Manufacturing Dec 2014

British Manufacturing Production, a key indicator, provides analysts and traders with a snapshot of the strength of the UK manufacturing sector. A reading which is higher than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Tuesday at 9:30 GMT.

Indicator Background

The British Manufacturing Production indicator measures the changes in output produced by manufacturers and in the turning of inventory. Manufacturing is a critical sector of the economy, and strong readings are an indication of economic growth.

The indicator posted a gain of 0.4% in September, marking a five-month high. This edged above the estimate of 0.3%. The markets are expecting a smaller gain in October, with the estimate standing at 0.2%.

Sentiments and levels

The US dollar could continue to ride the excellent jobs report we saw on Friday. These strong numbers should help ease concerns about whether the Fed remains on track for a rate hike in the first half of 2014. The British economy has not been able to keep pace with that of the US, so the pound could continue to lose ground. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5909, 1.5746, 1.5625, 1.5535 and 1.5290.

5 Scenarios

1. Within expectations: -0.1% to +0.5%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.6% to 1.0%: A strong reading can send the pair above one resistance line.
3. Well above expectations: Above 1.0%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome could prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations: -0.6% to -0.2%: In such a scenario, GBP/USD could lose one level of support.
5. Well below expectations: Below -0.6%: A sharp contraction would likely push the pair downwards, possibly breaking a second support level.
6. For more about the pound, see the GBP/USD.

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