British Pound Rallies on Robust UK PMIs, GBP/USD and EUR/GBP Latest

GBP/USD and EUR/GBP Latest Analysis and Charts

• Services activity was at an eight-month high in January.
• Cable clips 1.2773 after the data release.

?Most Read: British Pound Weekly Forecast: Ranges Look Set to Hold, But Watch US Data

The latest S&P Global PMIs showed UK services activity picking up to an eight-month high, while the composite index hit a fresh seven-month peak. Manufacturing however slipped to a three-month low.

According to S&P Global chief business economist, Chris Williamson,

‘UK business activity growth accelerated for a third straight month in January, according to early PMI survey data, marking a promising start to the year. The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.’

‘Businesses have also become more optimistic about the year ahead, with confidence rebounding to its highest since last May. Business activity and confidence are being in part driven by hopes of faster economic growth in 2024, in turn, linked to the prospect of falling inflation and commensurately lower interest rates.’

Mr. Williamson warned however that ‘supply disruptions in the Red Sea are reigniting inflation in the manufacturing sector. Supply delays have spiked higher as shipping is re-routed around the Cape of Good Hope.’

The latest data has seen UK rate cut expectations pared back further. The market is now forecasting around 88 basis points of rate cuts this year, after pricing more than 125 basis points of cuts at the end of last year.

Cable continues to probe higher and may soon test a set of recent highs all the up to the December 28th, multi-month print of 1.2828. The next driver of cable will come from the right-hand side of the quote, the US dollar. Thursday sees the latest US durable goods and the advanced Q4 US GDP releases (13:30 UK), while on Friday, US core PCE hits the screens, also at 13:30 UK.

GBP/USD Daily Price Chart

Chart using TradingView

Retail trader GBP/USD data show 45.75% of traders are net-long with the ratio of traders short to long at 1.19 to 1.The number of traders net-long is 5.31% higher than yesterday and 18.52% lower than last week, while the number of traders net-short is 5.14% lower than yesterday and 24.10% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise.

What Does Changing Retail Sentiment Mean for GBP/USD Price Action?

EUR/GBP continues to test a prior level of multi-month support around 0.8550. If this is broken convincingly then the 0.8500 area looks likely to come back into focus.

EUR/GBP Daily Price Chart

What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.