The Pound continued its strong run of gains last week after finding support from a number of data releases which bolstered confidence in the UK’s economic recovery.
A GDP report released last Tuesday confirmed that the nation’s economy made its best growth performance since 2007 sending the Pound beyond the 1.21 range against the Euro and close to a multi year high against the US Dollar.
Today however the Pound has fallen to a two-week low against the US Dollar and declined against the majority of its most traded peers after data released on Monday showed that the UK’s manufacturing sector expanded at its slowest pace in three months in January.
According to Markit its UK manufacturing PMI fell from the 57.2 recorded in December to 56.7 in January. The figure disappointed the market as it was below economist expectations for a reading of 57.0. The figure is still well over the 50 mark which indicated expansion.
The currency is not likely to remain softened by the data for long as despite the slight slowdown a separate report also showed that new orders rose close to a three-year high as the global economy improves. The new orders bode well for the UK’s unemployment figure as more orders means more work.
“Whilst domestic demand continues to climb, it is the expansion overseas that promises continued growth. The illusive export market has long been heralded as the key to unlock UK economic growth and in manufacturing appears to be coming to fruition, with new business rates climbing fastest in nearly three years.
This has enabled firms large and small, across the sector, to invest in staff, marking the ninth successive month on month increase in employment. The rate of growth in jobs has also remained close to November’s two and a half year high. Whilst costs climbed yet again, firms were able to pass these on to customers, a further sign of bullishness across the sector,” said David Noble Cheif executive at the Chartered Institute of Purchasing & Supply.
Looking ahead to the rest of the week we can expect most of the market’s attention to be focused on Thursday when the Bank of England makes its latest interest rate decision. Rates are not expected to be altered but with the continuingly positive data coming from all corners of the economy the BoE is under pressure to raise interest rates. All eyes will be looking to see whether the Bank will alter its policy stance.
Key data for the week ahead:
Tuesday February 4th – UK construction PMI
Wednesday February 5th – UK services PMI
Thursday February 6th – BoE interest rate and QE decision
Friday February 7th- UK balance of trade, UK industrial production, UK manufacturing production
Current Pound Sterling (GBP) Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6350 ,
Pound Sterling,,Euro,1.2095 ,
Pound Sterling,,Australian Dollar,1.8601 ,
Pound Sterling,,Canadian Dollar,1.8080 ,
[/table]
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