- GBP/USD rallied amid signs of recovery in the UK manufacturing sector.
- A modest USD pullback remained supportive of the strong momentum.
- Technical buying above the 1.3100 mark provided an additional boost.
The GBP/USD pair continued scaling higher through the early North-American session and climbed to fresh two-week tops, around mid-1.3100s in the last hour.
Following a brief consolidation through the early part of Wednesday’s trading session, the pair caught some aggressive bids after the latest CBI report showed that the UK manufacturing sector started the year on a strong footing.
Adding to this, the Quarterly Business Situation Index – the gauge of optimism in the manufacturing sector – rebounded sharply to +23 in January from -44 in October and marked its highest level since April 2014.
The data added to the latest optimism led by Tuesday’s stronger-than-expected UK wage growth figures and forced investors to temper expectations for an imminent interest rate cut by the Bank of England at its upcoming meeting on January 30.
This resulted into some aggressive intraday short-covering move, which took along some near-term trading stops being placed near the 1.3100 round-figure mark and further accelerated the intraday positive movement amid a modest US dollar pullback.
With Wednesday’s strong move up, the pair finally seems to have confirmed a near-term bullish breakthrough a three-week-old descending trend-channel. Hence, some follow-through strength, possibly beyond the 1.3200 handle, now looks a distinct possibility.
Technical levels to watch