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

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