– U.K. Purchasing Manager Index to Hold at 60.5- Highest Since 12/2006
– GBPUSD Eyes 1.6300 as Bullish Momentum Remains Intact
Trading the News: U.K. Purchasing Manager Index- Services
With the U.K. Services Purchasing Manager Index expected to hold at a 7-year high, a deviation from market expectations is likely to spur increased volatility in the British Pound as market participants weigh the outlook for monetary policy.
What’s Expected:
Time of release: 08/15/20138:30 GMT, 4:30 EDT
Primary Pair Impact: GBPUSD
Expected: 60.5
Previous: 60.5
DailyFX Forecast: 59.0 to 61.0
Why Is This Event Important:
Indeed, a positive development may spur increased bets of seeing the Bank of England (BoE) carry out its exit strategy ahead of schedule as the more robust recovery appears to be pushing the central bank away from its easing cycle.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Nationwide Home Price Index n.s.a. (YoY) (SEP)
0.5%
0.9%
Jobless Claims Change (AUG)
-21.0K
-32.6K
Mortgage Approvals (AUG)
61.5K
62.2K
Rising home prices along with the pickup in private sector credit may encourage another better-than-expected print, and the British Pound may continue outperform against its major counterparts as U.K. policy makers turn increasingly upbeat towards the real economy.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Retail Sales inc. Auto (MoM) (AUG)
0.4%
-0.9%
Total Business Investments (QoQ) (2Q F)
0.9%
-2.7%
Trade Balance (JUL)
-1.700B
-3.085B
Nevertheless, the near-term rally in the GBPUSD may come to a halt should the data dampen the outlook for stronger growth, and we may see Governor Mark Carney continue to rely on the non-standard measures to further insulate the economy.
How To Trade This Event Risk(Video)
Bullish GBP Trade: Services PMI Tops Forecast
Need green, five-minute candle following the print to consider a long British Pound trade
If market reaction favors a long trade, buy GBPUSD with two separate position
Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bearish GBP Trade: Data Dampens Outlook for Stronger U.K. Recovery
Need red, five-minute candle to favor a short GBPUSD trade
Implement same setup as the bullish British Pound trade, just in opposite direction
Potential Price Targets For The Release
GBPUSD Daily
Chart – Created Using FXCM Marketscope 2.0
Upward Trending Channel Remains Intact; Breaking Out of Multi-Year Wedge/Triangle?
Relative Strength Index Maintains Bullish Momentum
Interim Resistance: 1.6300 Pivot (2012 highs)
Interim Support: 1.6000 Pivot
Impact that the U.K. Retail Sales report has had on GBP during the last month
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
AUG 2013
09/04/2013 8:30 GMT
59.7
60.5
+25
+47
August2013 U.K. Purchasing Manager Index- Services
The Purchasing Manager Index for service-based activity climbed to 60.5 from 60.2 in July – marking the highest reading since 2006 – and the more robust recovery may encourage the Bank of England to switch gears in the coming months as inflation continues to run above the 2% target. The British Pound extended the advance from earlier in the week, with the GBPUSD climbing above the 1.5600 handle, and the pair continued to track higher during the North American trade to close at 1.5623.
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com
Follow me on Twitter at @DavidJSong
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Source: Daily fx