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Sterling holds above $1.66

Sterling edged away from a five-week high against the euro but held above $1.66 on Monday after data showed British manufacturing had slowed more than expected in August.

Factory orders from rose at the slowest pace in more than a year, according to the Markit/CIPS UK Manufacturing Purchasing Managers Index (PMI), which fell to its lowest level since June 2013.

Separate data showed signs the housing market was cooling, too: British mortgage approvals fell slightly in July.

The pound hit a 10-day high of $1.6645 before the data, before retreating to trade at $1.6621, still up 0.2 percent on the day.

"The difficulty for sterling is that we went a year where we got consistent upside surprises on numbers, and now we seem to be getting a reasonably consistent run of downside surprises," said Daragh Maher, a currency strategist at HSBC in London.

"But it is significant that it's still been able to hold above $1.66 despite the (PMI) number - that points to a suggestion that, for now, the main part of the price adjustment for sterling from the market's perspective is complete."

From a technical viewpoint, the 14-day relative strength indicator showed that sterling was edging back from oversold territory - a sign that the recent weakness might be over. Indeed, data from the CFTC showed speculators were starting to add to net long positions on the pound.

The manufacturing data will be followed by a construction PM on Tuesday and one for services on Wednesday.

An earlier PMI from the euro zone also showed manufacturing growth slowed more than thought in August as new orders dwindled and factories suffered amid worries over Ukraine.

That helped the common currency hit a five-week low of 78.92 pence before the UK data. But the euro then pared losses to trade at 79.025 pence, down 0.1 percent on the day.

The Bank of England's Monetary Policy Committee will meet on Wednesday but markets will have to wait another two weeks to see whether there has been any further dissent from its decision to keep interest rates at their record lows.

So far, just two of the MPC's nine members - Martin Weale and Ian McCafferty - have voted in favour of an immediate rate hike. No one is expected to join them this month.

"I think they may end up being on their own for a little while. I wouldn't expect any dissenters (in September), particularly if we see further declines in PMIs in the services sector," said Kathleen Brooks, research director at Forex.com.

British government bond prices slipped and underperformed against German and US debt, as investors awaited the sale of a new five-year conventional gilt on Tuesday.

The benchmark five-year gilt was one of the worst performers compared with other maturities before Tuesday's auction. As of 1400 GMT, it yielded 1.73 percent, up 2 basis points on the day.

Copyright Reuters, 2014



 



 
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Banking Review 2013


Annual2013/14
Foreign Debt $61.805bn
Per Cap Income $1,386
GDP Growth 4.14%
Average CPI 8.6%
MonthlySeptember
Trade Balance $-2.380 bln
Exports $2.181 bln
Imports $4.561 bln
WeeklyNovember 13, 2014
Reserves $13.268 bln