Weak manufacturing data hits the Pound
UK Purchasing Managers Index (PMI) yesterday was worse than expected, and it has bolstering the view a struggling economy will keep UK interest rates at record lows until next year.
Adding to sterling negativity was data showing UK mortgage approvals unexpectedly fell to their lowest level since December. Analysts said the Bank of England would hold off on raising rates while the economy struggles to recovery, which would keep sterling weak.
"The whole slew of economic data out of the UK has been pretty poor. It makes it much more difficult for the market to think that the Bank of England will hike rates any time soon. The recovery is not compelling enough to justify it," said Ray Farris, head of FX strategy at Credit Suisse.
A second purchasing managers' index from the services sector -- which makes up around 70 percent of the UK economy -- is due on Friday and could further dent sterling if it adds to a gloomy economic growth picture.
The euro zone is suffering from debt problems in periphery countries, but the common currency has performed well against sterling on expectations the European Central Bank is likely to flag another rate hike in July to tame inflation risks.
Further jobless figures from the states today could cause GBP/USD volatility. The only UK release of note is PMI construction. Given the construction sector is dragging down the economic recovery in the UK, the numbers could well have an impact on the value of the Pound.
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