Positive UK manufacturing data was unable to offset bearish sentiment toward the pound yesterday with the US dollar closing 0.3% up.
- Sterling opened under heavy pressure yesterday as the markets speculated that the BoE would decide to inject further monetary stimulus into the economy at their next meeting.
- The pound was able to trim early losses though after a stronger-than-expected reading of UK manufacturing activity showed the sector expanded after prolonged weakness.
- The PMI index rose to 53.7 in October from an upwardly revised 49.9 in September, signalling the fastest pace of growth since November 2007 and beating forecasts for a rise to 50.1.
- In the afternoon, the pound recovered further ground as a raft of US economic data on manufacturing, construction, and housing showed more evidence of a recovery in the world’s largest economy, encouraging investors to buy riskier assets.
- However, despite positive data, the pound was unable to make gains, still closing nearly half a cent down on the day as investors clearly remain cautious ahead of important central bank meetings this week.