GBP Rises After Strong Manufacturing Data

The pound advanced for the first time in seven days against the euro as a report showed a measure of U.K. manufacturing output expanded for a 15th month in May, boosting demand for Britain’s currency.

Sterling strengthened versus 13 of its 16 major peers before the Bank of England and the European Central Bank announce monetary policy on June 5. The pound was little changed against the dollar as separate data showed mortgage approvals fell to a nine-month low and futures traders increased their bets that sterling will appreciate against the U.S. currency. U.K. 10-year government bonds declined for a second day.

“The pound has further to gain,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London. “The market is crowded with long sterling positions and any weakness in data will encourage some profit taking, but that doesn’t change our view that the U.K. has a robust economic recovery and that the Bank of England will probably be the first major central bank to raise rates.” A long position is a bet an asset will rise.

The pound strengthened 0.2 percent to 81.25 pence per euro at 1:01 p.m. London time after declining 0.5 percent in the previous six days. Sterling was little changed at $1.6748 after rising 0.3 percent in the prior two sessions.

Markit Economics said its manufacturing index, based on a survey of purchasing managers, was at 57 in May, compared with a reading of 57.3 in April, remaining above the 50 level that signifies growth.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza