Strong Services Sector Gains

GBP has been on the rise today as traders digest the latest set of UK economic data. January PMIs saw the UK services sector bouncing back into growth territory last month with the index printing 53.3, up from the prior month’s 48.7 result and above the 49.1 the market was looking for. This marks the first time since July that the sector has been in growth territory after plunging over Q3 and Q4 2022. One particularly encouraging sign for the BOE was the PMI price index- used to determine expected future price inflation – was seen falling to its lowest level since April 2021.

Manufacturing Rises Also

Along with the increase in the services sector reading the manufacturing index also recorded an increase, jumping to 49.2 from 47 prior. While still in negative territory, the trajectory is encouraging and the reading was above the 47.5 the market was looking for.

UK Econ Outlook Improving

The data reinforces the view that the UK economy is doing a little better than expected when measured against projections being made into the back end of last year. The BOE recently said that while it still expects a downturn this year, the dip will likely be milder than expected. Following the UK economy narrowly avoiding falling into recession in Q4, this initial January data is being taken as an encouraging sign that the worst of it is over and the economy is back on the up, helping lift GBP sentiment.

Technical Views

GBPJPY

The rally in GBPJPY off the Feb lows has seen the market breaking out above the 159.98 level and more recently the 162.08 level. The latest break marks a significant development and while above here the focus is on a further push higher and a test of next resistance at 164.56, with the bear channel highs around there also. Retail market heavily short and momentum studies bullish, supporting the move.