UK Services PMI - Rumor then Small Deviation but Big Move

UK Services PMI came out today, Wednesday Nov. 3rd 2010 during the European session. There was a rumor about 45 minutes before the news that the number was going to come out higher. The GBPUSD popped up about 20-25 pips, however the rumor was not reported on the audio news feed TradeTheNews until after this move from about 1.6045 to 1.6070, and after this blip up, cable just went sidewise until the release. So it really became a question of whether you decide to trust the rumor or not. See top chart to see the move before the news caused by this.

In this case the rumor was correct, however the deviation is not what is normally considered to be tradable....normally it is best to look for at least a deviation of +/- 1.0 from the average of all economist's estimates for the news release number. Today the deviation was just +0.6, however cable did move up eventually, this is unlike the -0.6 deviation in July where GBPUSD moved down 10 pips and then went flat for 15 minutes. In the first 10-15 seconds there was about a 20 pip whipsaw of about 20 pips, but this resolved and cable moved higher. Here is the number:

*(UK) OCT PMI SERVICES: 53.2 V 52.6E
- Prices Charged Index: 51.7 v 49.9 prior (highest level since Sept 2008)

You must also be aware that there was already a +20 pip move higher when the rumor of a higher number hit the price. Sometimes with the news you have what is called "Buy the rumor, sell the news", so you must always be careful about the possibility of this occuring. Cable broke the 1.6100 level it had failed to reach earlier in the week, and broke its highs since February of this year. I believe possibly the move was exaggerated by the stops which were taken out above this crucial level, however the British Pound has been over-reacting to news lately as with the Construction PMI yesterday. While this is good, the deviations used in the Profitmongers live forex and futures trade room were deduced after years of watching this news moves, and have a certain level of safety built into them. We must remember than we don't have to catch every move, and it is much better to have news overreacting than under-reacting. See the last chart for how far GBPUSD went over the next half hour after the news.