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Sterling strengthens on manufacturing and retail data

3rd Sep 2013
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Sterling traders were encouraged to buy the Pound after the Manufacturing Purchasing Managers Index rose to the highest level since February 2011. We also heard from the British Retail Consortium that sales were up 3.6% on the year .These are two more pieces of positive data to add to the feeling that the UK economy is definitely on the mend.  We also get the Construction sector and the much larger service sector PMIs this week so if, as last month, they are all in positive territory and the Bank of England leaves everything on hold (they will by the way) then the Pound has every chance of ending the week at stronger levels than it started.

The US Dollar strengthened a little as the date for attacks on the Syrian regime was pushed back until Congress can vote.  US traders will be back to a couple of important pieces of US data today though. The manufacturing PMI and construction spending data will give further evidence as to whether the US recovery is solid or not. This won't be definitive proof but the US Dollar ought to strengthen if both data sets are in positive territory.

Overnight news that the Reserve Bank of Australia left their base rate on hold was no great surprise but the fact that they lowered their expectation for growth was interesting. The Aussie dollar strengthened a little after the announcement and the statement. WE can only assume tonight's release of the latest economic growth data will confirm their suspicions and the Aussie Dollar may weaken a little again ahead of the election on 7th September. . Those with Australian Dollars to sell might want to take advantage of their little dip.

The New Zealand Dollar also strengthened a little overnight; partly on the back of the Aussie move and partly on profit taking. The Sterling - NZ Dollar exchange rate seems to be allergic to NZ$2.00 to the Pound because every time we get there, it dips a few cents again. This is probably purely psychological and, as interest rates start to eek higher in other countries, traders will have to eventually bite the bullet and trade above that level but trying to predict when that break might happen is pure speculation.
 

Article supplied by David Johnson, Director at Halo Financial - Currency Specialists

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