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

The UK economy will release its December construction PMI later in the European session, with the figure expected to arrive a tad firmer, and extend further into expansion territory, with a 53.0 print predicted versus previous 52.8 result.

A stronger print of the construction sector PMI may not come as a surprise, given yesterday’s auspicious manufacturing PMI report, as the construction PMI has widely shown the similar behavior as the manufacturing and services PMIs, Analysts Societe Generale remarked in a research note.

Should the PMI reading beat expectations, we could see GBP/USD recovering further to test 1.23 handle. Contrarily, the cable could breach 1.2200 levels on disappointing results. However, the reaction to the data may remain limited as the main risk event for the major today remains the FOMC Dec meeting minutes due later in the NA session.

Analysts at TDS noted, “The industry seems to be largely shrugging off any Brexit-related uncertainty, and in fact according to the PMI has rebounded to its strongest level since before the buy-to-let restrictions kicked in in the spring of 2016. So we look for further modest gains into 2017.”

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 45 pips in deviations up to 2 to -2, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.

GBP/USD: Technical levels

Haresh Menghani, Analyst at FXStreet notes, “The pair continues to find support near 1.2200 handle and has managed to stage a goodish recovery from the said support. However, further recovery beyond 1.2260 immediate hurdle might continue to confront resistance near 1.2300 handle above which a fresh bout of short-covering might now assist the pair to surpass 1.2335-40 horizontal resistance and aim towards reclaiming 1.2400 round figure mark ahead of 50-day SMA resistance near 1.2425 region.”

“Alternatively, a clear break below 1.2200 handle is likely to accelerate the slide immediately towards 1.2160-55 intermediate support, en-route 1.2130-25 horizontal support and 1.2100 round figure mark.”