Ster­ling trades close to 11-mth highs vs dol­lar

Kuwait Times - - BUSINESS -

Ster­ling traded close to 11month highs against a broadly weaker dol­lar yes­ter­day, as in­vestors fo­cused on a two-day Bank of Eng­land meet­ing that should pro­vide clues on whether in­ter­est rates could be hiked in com­ing months. A pur­chas­ing man­agers’ in­dex (PMI) sur­vey show­ing growth in Bri­tain’s con­struc­tion in­dus­try tum­bled to an 11month low in July had lit­tle im­pact on the cur­rency.

The pound briefly touched Tues­day’s high of $1.3245 af­ter the data, the strong­est since mid-Septem­ber, which it had hit af­ter the equiv­a­lent sur­vey for the man­u­fac­tur­ing sec­tor came in stronger than ex­pected. It eased back to around $1.3235 by 0845 GMT, up around a quar­ter of a per­cent on the day. “I don’t think we took a lot of di­rec­tion from the con­struc­tion PMI, as it’s such a small part of the econ­omy,” said RBC cur­rency strate­gist Adam Cole. “...Ca­ble (ster­ling/dol­lar) is re­ally just be­ing dragged up by euro/dol­lar at the mo­ment.”

“The key num­ber is to­mor­row’s ser­vices PMI, which has on oc­ca­sions in­flu­enced the MPC (BoE mon­e­tary pol­icy com­mit­tee).” Thursday’s PMI for Bri­tain’s dom­i­nant ser­vices sec­tor will be fol­lowed by a pol­icy de­ci­sion, the quar­terly In­fla­tion Re­port, and then a press con­fer­ence with Gov­er­nor Mark Car­ney, in what has been dubbed “Su­per Thursday”.

Although an­a­lysts agreed that the con­struc­tion num­bers did not mat­ter too much for ster­ling, they nev­er­the­less were the lat­est in a run of weaker data from the Bri­tish econ­omy, which got off to a slug­gish start to the year with an an­nu­al­ized growth rate of just 1 per­cent.

That softer data - along with deep un­cer­tainty about the way Brexit will play out and its im­pact on the econ­omy - has cooled spec­u­la­tion that the BoE was poised to lift rates from record lows, which fol­lowed hawk­ish re­marks by pol­i­cy­mak­ers at the bank in re­cent months.

“The only thing which can break ster­ling strength (against the dol­lar) is if the BoE’s gov­er­nor is way too dovish to­mor­row and pro­vides no hints in re­la­tion to change in the bank’s pol­icy,” said Think Mar­kets an­a­lyst Naeem As­lam.

Against the euro, the pound was 0.2 per­cent down on the day at 89.58 pence, close to a nine-month low.

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