LONDON: Sterling rose on Wednesday after upbeat US data clipped safe-haven demand for dollars and as British manufacturing survey data pointed to a small increase in output after the historic collapse caused by the coronavirus.
The Purchasing Managers Index survey for June came in at 50.1, in line with a forecast from economists polled by Reuters and up from 40.7 in May. It was unrevised from a preliminary reading. The move above the 50 line signifies growth for the first time since February.
After earlier trading flat, the pound was up 0.4% to $1.2452 by 1455 GMT, while against the euro it was 0.2% ahead at 90.39 pence.
In choppy trading, the dollar fell as risk appetite improved following US payrolls data.
Sterling's rise built on gains from Tuesday.
British Prime Minister Boris Johnson announced a new spending plan on Tuesday to revive the economy, but analysts said the move higher was not down to his announcement as the planned spending was limited and largely expected.
Concerns that Britain will fail to secure a trade agreement with the European Union at end-2020 continue to weigh on the currency, although with the pound down 6.5% versus the dollar so far this year, some analysts say it is due a rebound.
"We believe UK markets are in pole position to play catch-up," said Mark Haefele, chief investment officer, UBS Global Wealth Management, citing "overdone" political and monetary risks in the UK and a belief that UK assets are undervalued.
"In particular, we see sterling as the most notable beneficiary of the vulnerability of the US dollar, which we expect to fall as safe-haven flows reverse and as political uncertainty mounts ahead of the November US presidential election," he said.
Comments
Comments are closed.