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It might be a slow week for sterling as the U.K. manufacturing production report is the only piece of data on the docket. Brexit updates could still steal the spotlight, though!

U.K. manufacturing production (Jan. 10, 9:30 am GMT)

On Wednesday’s London session, the U.K. will print its November manufacturing production report and probably show a 0.3% uptick. This would be an improvement over the earlier 0.1% gain.

Along with this report, the industrial production figure will be released and this might show a 0.4% gain after staying flat in the previous month. The goods trade balance, which is often considered a leading indicator for trade activity, could show a larger deficit of 11.0 billion GBP from the earlier 10.8 billion GBP shortfall.

U.K. cabinet reshuffle

Nope, not talking about a change in spring wardrobe or Prime Minister May going all KonMari with decluttering. Or am I?

Last week, the No. 10 announced that she plans on replacing five cabinet ministers to ensure that the U.K. government has a stronger Brexit position. With that, pound traders would likely keep close tabs on who she would invite for dinner or tea in the coming days and how the potential appointments could affect their negotiating stance.

Chart to watch: GBP/USD

GBP/USD 4-hour Forex Chart
GBP/USD 1-hour Forex Chart

Cable is currently holding on to the area of interest at the middle of its ascending channel on the 1-hour time frame. Positive sentiment relating to the cabinet reshuffle could allow for an upside break that might take price up to the resistance.

Previous week review

The pound’s performance this past week is a bit mixed. But that doesn’t mean that the pound was vulnerable to opposing currency price action. Well, it did become vulnerable later, but it did show uniform price action early on.

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart

The pound started the year by showing strength on most pairs, likely because of news over the weekend that Theresa May plans to reshuffle her cabinet to improve her position ahead of Phase 2 of Brexit talks.

The U.K.’s disappointing manufacturing PMI reading (55.8 vs. 56.4 expected, 56.1 previous) was revealed on Tuesday. Instead of dropping, however, the pound only tossed and turned for a bit before resuming its upward push. And as noted in Tuesday’s London session recap this was likely due to the fact that Markit’s commentary were upbeat overall.

Unfortunately for the pound, Wednesday rolled around and revealed that the U.K.’s construction PMI reading was a disappointment as well (52.2 vs. 52.8 expected, 53.1 previous). This time, however, Markit’s commentary was not as upbeat, which is likely why the pound began to slide across the board.

The pound later found support during Wednesday’s U.S. session, although there weren’t any apparent catalysts.

After that the pound jumped higher ahead of the U.K.’s better-than-expected services PMI reading (54.2 vs. 54.0 expected, 53.8 previous). Whether this was due to innocent preemptive positioning or a sneaky leak is not really clear.

However, it’s clear that price action on the pound became mixed (and even diverged) from this point onward. And market analysts say that the lack of clear direction on the pound was due to investors waiting for the next round of Brexit talks to start.