The December UK manufacturing PMI smashed forecasts in rising to 56.1 from 53.6 in November, which was revised up from 53.4. The median forecast had been for a 53.4 outcome, while the 56.1 reading is the best since June 2014, indicating brisk expansion in the sector. Markit, the compiler of the data, reported that new orders and output components hit record levels in the 25-year history of the data series. New business came in from both domestic and export markets, the latter continuing to benefit from the post-Brexit vote weakness in the pound. Sterling rallied by 30 pips versus the dollar in the wake of the release, and is now trading with a fractional gain on the day at 1.2282. It is up from a two-session low at 1.2247, making a peak of 1.2306, which breached resistance is at 1.2297-1.2300, which encompasses year-end holiday-season highs. Next resistance is at 1.2344-50. The Sterling market will be factoring upside risk to the construction and services PMI reports, due out tomorrow, and Thursday, respectively. In the longer term I remain short from 1.2265 with Target 1 1.2160.
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