Sterling leaps to a 5 ½ month high against dollar

London - 2 August 2010

Sterling leaps to a 5 ½ month high against dollar

- UK data continues to outperform U.S figures -

Sterling rose to a 5 and a half month high against a broadly weaker dollar ($1.5764) this morning as stronger equities lifted investors’ appetite for riskier currencies. The pound also leaped to a near-four week high against the euro, to 82.86 pence, and a one month high against a basket of other currencies.

The UK’s PMI Manufacturing data for July also came in this morning in line with expectations, hitting a robust 57.3. Economists had forecast a fall to 57.00.

Mark Bolsom, Head of the UK Trading Desk at Travelex Global Business Payments says, “The results of the PMI manufacturing data are encouraging as it clearly shows Britain is growing at a stable pace. Despite this, the figures came in as expected and all the good news had already been priced in.

“Momentum is building in the UK economy, which seems to have turned a corner since the contagion fears during the Eurozone crisis two months ago. Investors are currently reassured about the pace of recovery and this is helping to support the pound. Market focus remains on the U.S., where fears of a double-dip are increasing.”

Bolsom concludes, “In the short-term, I would expect to see continued support for the pound as UK data continues to out-perform that in the U.S. In the medium-term however, I would expect the UK government’s austerity measures to impact the pound’s strength and continued economic growth in the UK.”

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