Dollar is pressured throughout the data as investors' risk appetite got a boost as the new year starts, on solid manufacturing data. Commodity currencies are the biggest winners as China PMI manufacturing rose to 56.1, highest level since April 2004. Strong growth in the manufacturing sector in China will boost demand for commodities. Crude oil rides on the optimism and breaches 80 level today while gold also rises to as high as 1124.6 so far. Data released from US saw ISM manufacturing index rose more than expected to 55.9 in December.

Sterling was lifted against dollar as PMI manufacturing in UK rose to 54.1, highest level in 25 months. Mortgage approvals also beat expectation by climbing to 60.5k. However, markets remain cautious on UK's debt outlook and ahead of BoE rate decisions later this week. Sterling somewhat lags behind other majors currencies and has indeed weakened against commodity currencies and Euro.

Data from Eurozone saw PMI manufacturing revised up to 51.6. Sentix investor confidence, though, missed expectations by rising to -3.7 only. Euro continues to underperform Aussie and Loonie. For example, EUR/AUD dropped sharply to as low as 1.5747 so far today. The crosses still still trading well inside medium term falling channel and is set to continue to 2007 low of 1.5472.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6064; (P) 1.6149; (R1) 1.6250; More

GBP/USD continues to stay in range of 1.6046/6232 today. In spite of the strong rebound, GBP/USD is still struggling to take out 38.2% retracement of 1.6875 to 1.5829 at 1.6229 decisively. Intraday bias remains neutral for the moment. On the upside, break of 1.6232 will suggest that whole rise from 1.5829 has resumed and should target 61.8% retracement at 1.6475. On the downside, below 1.6046 minor support will flip intraday bias back to the downside. But after all, more consolidations should still be seen as long as 1.5892 support holds and risk of another rise remains.

In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503.

However, note that sustain break of 61.8% retracement of 1.6875 to 1.5829 at 1.6475. will in turn indicate that whole fall from 1.6875 has completed and recent price actions from 1.7043 are merely consolidations to the larger rise from 1.3503 only. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

GBP/USD