The pound is finding comfort from the better-than-expected UK PMI data earlier here, with GBP/USD now rising up by 0.5% to 1.2550 levels. The thing to note about the rise today is that perhaps buyers are looking to be able to shake off key resistance around 1.2500 with the 100-day moving average (red line) also resting nearby.
That has kept price action more contained so far this week but we might just finally get a breakout today after the better data. The question is, can the break hold and is the data significant enough to warrant that?
I reckon that it just might. For one, there are a couple of things to be mindful of with the UK headlines today. With regards to the PMI data, the economy looks to be in better shape than feared in Q4 and that will give the BOE more breathing room on rates. Besides that, the data also highlights more stubborn inflation pressures and that will see the central bank stick with a more hawkish rhetoric for as long as they can get away with it. And if the economy continues to hold up, who is to say that we might not see another rate hike?
Other than that, we had Ofgem announce a higher price cap on energy prices and that will feed into inflation pressures too in the bigger picture.
So, these are decent developments that could turn the picture around for the pound; in the sense that it is going to keep a firmer BOE outlook on rates at least. And that might be enough for cable to contest a move higher amid a technical break, as the dollar remains weak across the board as well.