GBP/USD rose to its highest level in almost two weeks above 1.2770 following strong preliminary UK PMI data for January released on Wednesday, but staged a downward correction later in the session. Commerzbank economists analyze the outlook for the British pound (GBP).
The chances of the British economy experiencing better times in the coming months increase
On Wednesday, the Pound saw a major short-term recovery after the services PMI hit 53.8 points. This means that it is now well above the neutral level of 50, which certainly increases the chances of better times for the British economy in the coming months. It also takes some pressure off the Bank of England to cut interest rates significantly again soon.
So why couldn't the Pound maintain its gains? The latest surprise was nothing more than a continuation of the upward trend that began a few months ago and, therefore, does not allow for a true fundamental reassessment.
Of course, the long-term outlook could change over the course of several months. If the PMI indices continue to perform so well, this should eventually be reflected in the economic data. And then the Pound should benefit more sustainably. Although this is not our base case, the chances of this occurring increase with each new positive reading.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
