GBP/USD touches a high of 1.3102 on the day

GBP/USD H1 01-04

The pound is now the top performing major currency on the day as it pushes higher following the release of the manufacturing PMI earlier. Cable now takes a peek above the 1.3100 handle with the dollar also still on the weaker side since the start of trading today.

The release of the UK manufacturing PMI earlier may sound good in terms of headlines as the print hits a 13-month high. However, the jump owes much to record stockpiling on Brexit uncertainty, which is unlike anything seen previously in G7 country.

The thing about stockpiling is that it not only masks the underlying weakness of factory activity now, but it has other negative implications too. The issue with stockpiling is that it hurts companies' profitability and that in turn will help to limit any further potential future investment. That will hurt the UK even more considering the Brexit situation where total business investment declined in every quarter of the calendar year in 2018 - the first time that has happened since 1980.

That said, the manufacturing sector is only a small part of the UK economy as it relies more heavily on services. Despite the bounce in the pound, sentiment is still very much driven by Brexit at this point.

I wouldn't look too much into the move higher in the pound unless Brexit headlines start looking more positive. At the moment, we're headed for another round of indicative votes and all eyes will be whether or not parliament can settle on a majority for any form of Brexit. Otherwise, there is the potential of yet another meaningful vote to take place before the end of next week.

Everything is still up in the air at the moment with no-deal and a general election among the possibilities to weigh on the pound while a long extension and a second referendum being scenarios that could help lift the currency.