Good manufacturing data boosts sterling | Smart Daily Currency Note
GBP/USD – 1.5306
Sterling moved upwards to a three-week high against the dollar as better than expected UK manufacturing figures boosted the UK currency yesterday. The British Purchase Manager’s Index data emerged more positively than expected (at 51.3 instead of 50.2); the highest gauge of manufacturing activity in fourteen months. With the manufacturing expanding above estimates, chances are increasing that the Bank of England will hold off from instigating further action as it meets to discuss policy on Thursday when incumbent Governor Mervyn King chairs his final policy meeting. The UK currency has still performed poorly this year, and markets will be waiting to discover what impact Mark Carney can have when he takes over the helm at the bank. This morning sees the release of UK construction figures: be in touch with Smart to discuss whether sterling can maintain this upward momentum.
The US dollar weakened throughout yesterday afternoon in most of its major pairings following downbeat manufacturing figures. The Institute for Supply Management unveiled its manufacturing index fell through April along with new orders and employment. – the first contraction since November. The weak figures have helped to dilute on-going speculation of whether the Federal Reserve will taper back its quantitative easing initiative later on this year, though positive sentiment surrounding the currency is unlikely to wane ahead of the next Federal Open Market Committee interest rate decision later this month. Indeed, the San Francisco Federal Bank President yesterday commented that the US asset purchase facility could be reduced as early as this summer, and as a growing number of central bank officials reduce their willingness to keep expending the balance sheet we may see the US currency strengthen into the summer months. We saw the US dollar’s ability to weather negative data last week, so with important Trade Balance figures emerging this afternoon call in for the latest information and help with your trading requirements.