Pound sterling maintains highs on construction PMI
Pound sterling was back on the offensive after the UK construction sector expanded at the fastest pace in more than six years, according to Markit Group.
The pound continued to be well-bid, as consecutive data releases continue to show improving fundamentals for world’s seventh largest economy. The GBPUSD pair fell sharply from its 27-month high in Monday’s session after the US manufacturing industry outpaced expectations. The pound pared its losses in Tuesday’s European and North American sessions, breaching the 1.64 barrier for the second time in as many days. The pound soared 57 pips to 1.6410 US, putting it within striking distance of its daily high. The pair was rejected near 1.6440 after surpassing the initial resistance of 1.64.
“The markets will continue to romance the idea that the Bank of England will ultimately have to raise interest rates earlier than is currently expected,” said Paul Robson of Royal Bank of Scotland. “The UK recovery does seem to be leading many other developed nations and that translates into a favourable move in interest-rate spreads and that is something that tends to support the currency.”
The Bank of England brought forward its guidance on unemployment last month amid signals of stronger than forecasted job growth. Although BOE Governor Mark Carney has warned repeatedly the revised outlook isn’t an automatic rate-hike trigger, market participants expect a rate cut sooner than previously expected.
The pound was unable to extend its winning ways against its European rival, the euro, which edged up 9 pips to 0.8288. Investors were pleasantly surprised to learn Spain’s jobless levels fell for the first time since 1997. The euro region’s fourth largest economy still struggles with a towering unemployment rate of 26.7 percent.
The British pound is the best performing developed-nation currency of the past six months, having edged up 7.4 percent. The euro advanced 3.6 percent over that same period, while the US dollar weakened more than 1 percent, according to the Bloomberg Correlation-Weighted Indexes.
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