Positive economic data supports sterling | Smart Daily Currency Note
GBP/USD – 1.5434
Sterling sailed to a three-week and two-week high against the US dollar and euro respectively yesterday following the Purchasing Manager’s Index for the UK Services sector showing the fastest rate of expansion for over a year. The UK currency found gains in all its major pairings as the report also noted new business to have increased at the quickest pace for over three years last month as better market conditions and fairer weather bolstered growth. Expectations are now intensifying that the Bank of England will keep their monetary policy strategy unchanged at their monthly meeting later today. Manufacturing, Construction and Service sector activity figures have all exceeded predictions this week, and in Mervyn King’s last meeting before Mark Carney takes over the helm at the Bank of England economists are expecting the UK’s asset purchase facility and interest rate level to stay constant as the economy has “all cylinders now firing” according to the Markit report. Keep on the pulse of the recent sterling surge throughout an important day today with Smart.
The US dollar had a varied day as markets reacted to the latest batch of data from the United States – whose service sector, according to the Purchase Manager’s Index, expanded slightly above expectations in May though growth in factory order figures were disappointing and the US private sector added fewer jobs than hoped last month. The disappointing report from payroll processor ADP especially has fuelled uncertainty over the fate of quantitative easing as employment will be a key catalyst if the Federal Reserve’s asset purchase programme is to be scaled back. The US currency stayed range bound against the euro and weakened in the face of strong sterling performance, though unemployment data released today and tomorrow will be crucial having been highlighted as a key influence over monetary policy going forward. The subdued pace of hiring however may indicate that employment may not be keeping pace with the rest of the recovery and experts remain split as to how soon monetary policy could be tightened. Call in for the latest developments.