The pound continued to strengthen on Monday against the euro for the fourth day in a row. This came off the back of data that showed that manufacturing in the UK unexpectedly grew last month. Markit Economics reported that its UK manufacturing Purchasing Managers’ Index (PMI) rose to 53.2 from September’s revised 51.5 – the initial forecast had been for a decline to 51.4. This data was particularly good news for sterling and the UK as any reading over 50 indicates expansion.
Sterling had a slightly slower start to the week against the US dollar as the upbeat UK manufacturing PMI data was countered by strong US data published on Friday and on Monday. The overall consensus is that the U.S economic recovery is back on track and this has fuelled speculation that the US Federal Reserve could raise interest rates earlier than expected. This sentiment has strengthened the dollar and reduced the effect of positive UK data.
Today we have the UK’s construction PMI data which is forecast to show a slight decline but after yesterday’s positive manufacturing data perhaps we should be expecting something more positive.