Saturday , January 16 2021

A cable rises above the 1.31 handle as a pound stays firm following PMI gains

GBP / USD touches a high of 1.3102 on the day

GBP / USD H1 01-04

The pound is now the top currency that is best performed on the day as it pushes our higher after the PMI manufactured earlier. Cable now takes a snapshot above the 1.3100 link with the dollar also on the weakest side since trading started today.

The release of PMI manufacturing in the UK earlier might sound good in headlines as the print reaches a high level of 13 months. However, the jump is very okay to record stacking work on the uncertainty of Brexit, which is unlike anything seen in the G7 country.

The thing about stockpiling is that it not only hides the fundamental weakness of factory activity now, but it also has other negative implications. The issue of stockpiling is that it hurts the profitability of companies and that in turn will help to limit any potential future investment. That will damage the UK even more considering Brexit's situation where total business investment in each quarter fell from the calendar year in 2018 – the first time that has happened since 1980.

That said, the manufacturing sector is only a small part of the UK economy because it is more dependent on services. Despite the bounce in the pound, Brexit is still very much feeling.

I wouldn't look too far into the higher movement in the pound unless Brexit headers begin to look more positive. At the moment, we are leading to another round of indicative votes and each eye will mean whether the parliament can settle on a majority for any kind of Brexit or not. Otherwise, there is potential to hold another meaningful vote before the end of next week.

Everything is still in the air at the moment with no general agreement and election among the possibilities to weigh the pound while a long extension and second referendum are scenarios that could help raise the money.

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