The British Pound Sterling, on Tuesday, August 1, surged to its highest levels against the dollar since mid-September on Tuesday, as data showing UK manufacturing growth recovered from a seven-month low in July eased concerns about an economic slowdown.
Tuesday’s Purchasing Managers’ Index (PMI) survey climbed to 55.1, exceeding the 54.4 consensus in a Reuters poll of economists, helped by the biggest influx of new export orders since 2010.
The numbers should hearten policymakers at the Bank of England, which will make a policy decision and release its latest quarterly Inflation Report on Thursday, and should soothe investors’ fears that economic growth is deteriorating rapidly after a sluggish start to the year.
A run of weak data has – along with deep uncertainty about the impact of Brexit on the economy – cooled speculation that the BoE is poised to start removing its crisis-level stimulus, which followed a series of hawkish remarks by policymakers at the banks in recent months.
The latest numbers were not in themselves enough to substantially change the outlook either for sterling or for the BoE, said BNP Paribas currency strategist Sam Lynton-Brown.
“The data was slightly better than expected but it shouldn’t mean much for sterling, particularly this week, when we have more important data flows – the Bank of England’s quarterly Inflation Report and also the services PMI,” he said, referring to equivalent data from the services sector due on Thursday.
“Aside from the fact that it was only a moderate upside surprise, the manufacturing sector is a small contributor in comparison with services to the growth outlook, and so is not that important for the Bank of England.”
While a push-back of rate hike expectations has helped drive the pound to nine-month lows against the euro, it has not been enough to outweigh pessimism around the U.S. dollar.
Having been trading around $1.3208 before the data, sterling rose to as high as $1.3240 after its release, up 0.2 percent on the day and its strongest since Sept. 15.
Against the euro the pound gained 0.4 percent on the day to trade at 89.30 pence, but that was less than a cent away from last week’s lows.
Investors added to bets against the pound in the week up to last Tuesday, data showed on Friday, having taken them to their lowest in sixteen months the previous week, Reuters reports
