The Pound surged higher against the Euro on Tuesday after Manufacturing data showed a 6% rise in December.
The Manufactuiring PMI, compiled by financial information provider Markit, increased from 53.1 to 56.1 in December and reached a 2.5 year peak.
The rise was put down to the weak pound stimulating exports which manufacturing is particularly reliant upon.
It was further proof theat Brexit had not been as negative for the economy as the consensus of opinion had previously held.
The drastic fall in the pound following the referendum may actually have helped rebalance the economy, as was forecats by investment advisory service Capital economics prior to the vote.
May's Speech Helps Pound
After falling for several weeks over Christmas the Pound was further helped at the start of the week by comments from Prime Minister May who struck a conciliatory tone in her her New Years’ message.
May said she wanted to represent all Britons at negotiation talks with the EU - not just the 52% who voted for Brexit.
The message seemed to underline a desire for a more inclusive stance, signifying a higher chance of a softer less economically disruptive Brexit.
Euro hit by Italy Concerns
The single currency, meanwhile, was hit by comments from the head of a leading think tank called the Center for Economic Studies Ifo Institute, which publishes a respected survey of Business professional’s views each month, called the Ifo Business Climate Index.
The head of Ifo, Dr Clemens Fuest, told German newspaper Tagesspiegel that living standards in Italy had not changed since 2000, and that the Italian people would soon get impatient with the EU unless they improved.
He also said that the German legislature and German electorate would not condone a bailout of the Italian banking system.
The story was reported by news agency Reuters, who pointed out that Italy had not asked Germany for a bailout, but had rather provided its own state bailout for struggling lender Banco Monte die Paschi di Siena.
From a technical perspective, the Pound-positive news flow corresponds with more bullish charts, which show a hammer reversal candlestick at Friday’s lows.consist of a long range with a small ‘body’ (the body is the difference between the open and close) situated at the top of the range such that the day resembles a ‘hammer’.
The hammer is a Japanese candlestick pattern which consists of a long range with a small ‘body’ (the body is the difference between the open and close), at the top of the range, such that the day resembles a ‘hammer’.
Tough resistance from the monthly pivot (PP) directly above the exchange rate at 1.1775 may make upside progress slow, however.
A break above the 1.1850 level, however, would confirm a clearance of the pivot and indicate a continuation up to a target at 1.1995.