The pound stopped its aggressive decline on Monday, with the pair is trying to recover its ground and find a bottom in the 1.30 area. The latest relief came from surprisingly strong UK PMI data. The manufacturing indeх rose 53.8, above the expected 52.5, after three months of slowing. The prior result was revised higher to 53 from 52.8. Moreover, the output expanded at the fastest pace in four months.
However, it’s just a local bullish driver which will likely be only a short-term boost for GBP/USD as Brexit issues remain in market focus this week. The annual Tory party conference could bring back bearishness to the sterling. Traders will closely follow the PM May’s speech on Wednesday, so the downside risks for the pound persist from this front as the two sides haven’t still resolved some of the key issues in the “divorce” negotiations.
As such, the pound looks interesting for a “sell on rallies” play as long as there is no significant progress in the Brexit deal. Another source of uncertainty for the British currency is the widespread solar strength after the FOMC meeting last week. So after some attempts to get back above the 1.31 threshold, the pound could challenge the 1.30 threshold and refresh mid-September lows in the 1.2970 region.