Cable rallies through January highs

GBP/USD was outstanding last week and managed to finish the week on a high even without fresh data to drive it higher.

Cable printed a high of 1.6385 which was just higher than January highs of 1.6383. This was effectively its highest level since August 2011 and the price action continues to look bullish.

A better-than-expected China manufacturing PMI reading (51.4 versus 51.2) has already set the tone for risk this morning. While the PMI was ahead of consensus, this reading was flat from October. In the UK, data kicks off later today with manufacturing PMI expected to come in at 56.5. This would be a significant improvement on the previous reading of 56 and should be enough to keep the pound bid. Tomorrow we have construction PMI which will be the major release ahead of the BoE decision on Thursday. While no change is expected, any comments around the economic recovery and forward guidance will be a source of volatility for the pound.

Tapering expectations focus on jobs data

USD/JPY will also be interesting pair to watch from both sides of the equation. The pair continues to hold its ground above 102 and is clearly waiting for some direction at the moment. BoJ Governor Haruhiko Kuroda is becoming increasingly vocal and will be looking to reinforce the idea that the fiscal reform is needed to reassure investors.

On the US dollar side, arguably the most significant reading this month is set to be released in the form of the non-farm payrolls. Friday brings US non-farm payrolls which many feel will be the key reading to determine whether the Fed will taper. The market is looking for 184,000 jobs added and for the unemployment rate to fall to 7.2%. A lot of analysts feel we need to see a reading closer to 200k to really entertain any talk of tapering. Additionally, upward revisions for the past couple of months would really raise the 3-month average and would be bullish for the USD as well. Last week’s highs on USD/JPY at 10.2.61 will be the level to watch in the near term.

GBP/USD

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.