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Trading The UK Services PMI: August 5, 2014

Published 08/04/2014, 02:23 AM
Updated 07/09/2023, 06:31 AM

UK Services Purchasing Manager Index will be released today and considering the weakness in recent data releases, if we get another weaker than expected report, the GBP will probably drop further as speculation for an end of the year rate hike by the BOE could be taken off the table.

4:30am (NY Time) UK Services PMI Forecast 58.1 Previous 57.7
Deviation: 2.5 (BUY GBP 60.6 / SELL GBP 55.6)

The Services PMI is tradable with a minimum deviation of 2.5 between the forecast and the actual release. If we get at least 60.6 or better, we could see some demand in the GBP and we will consider BUYING GBP against weaker currencies. If we get a 55.6 or lower, the GBP could weaken and we should look to SELL GBP against stronger currencies.

I’d recommend to use 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: GBP/USD.

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 the 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 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.

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